Insight Selling – Helping Your Retail Clients Increase Profit Per Sale

Today I’m continuing the mini-series on “How to Sell Small Business Owners.”  If you want to succeed in today’s small business sales environment, you need to get yourself in a frame of mind to provide valuable insights to your clients.  What can you explain to your clients that might help their business in a bigger way?  I recommend a book entitled “The Challenger Sale.”  This book relays interesting results from a study of thousands of sales people in all kinds of product categories.  Of the top producing sales people selling solutions rather than one product, only 2% were in the category of “relationship builders.”  In other words, while top reps do build relationships, this is not their primary focus.  Over 50% of top reps fell into the “challenger” category – someone who challenges the prospect by presenting new information not thought of before; gives insights; is not afraid to talk about money; is not afraid to talk about value propositions; and is not afraid to challenge the client.  Of course, good relationships are always important.  But the main focus of these top sellers was on creating disruptive innovation for that business.  They were challenging and inspiring the business owners to see the potential of accepting another solution.  Three other very helpful books are E-Myth (the original one), Duct Tape Marketing, and In-Bound Marketing.

Here is the video if you prefer to watch today’s post, or you can click the link at the top of the post to listen to it.  Otherwise, scroll past the video and keep reading:

The post today is how to increase the profit per purchase for your small business prospects.  Focusing just on revenue can be disastrous for a retail business.  The business may make sales which are actually not profitable.  To have a sale on specific items, which brings potential customers to the store is okay, but the profit for overall sales must be considered.  The business owner should ask this question:  “Are the customers buying only the sale item, or am I doing a good job of selling other merchandise?”  To understand the profit per sale, there must be reporting and data on two important things:  (1) profit per hour (2) profit per customer.

We’ve touched on these subjects already in an earlier post, but here I’d like to specify the “profit” (not just “cost”) per hour.  It’s not that difficult to calculate when you have the right data.  Number one is the “fixed cost per hour.”  Gather a total of all fixed costs such as rent, utilities, etc.  Then divide that figure by the total number of hours the business is open, and you have the “cost” per hour.  This is the amount necessary just to open the store.  But to figure the “profit” per hour, you must also consider the variable costs such as payroll, goods sold, etc.  Take the amount of revenue and subtract these fixed and variable costs to arrive at the “profit per hour” figure.  Review this process until you have a very thorough understanding of profit per hour and talk to your prospects and clients about this.

Next you must understand the “profit per customer.”  The POS Software that we use for our retail clients is able to track the gross margin.  If the business owner is willing to load in the cost for each item, we know the revenue for each item as it rings up in the point of sales system.  We can easily calculate the profit per order, and we can look at it by customer.  In other words, if the business owner inputs how much each item costs and how much it sold for, they can pull reports showing “Gross Profit” for each sale.  In other words, take the price of the item then subtract the cost of that item to get the gross margin and you can then calculate the total gross margin for all purchases by a single customer.  This is very important when a customer comes back needing a special favor such as a refund.  Perhaps the customer wants a refund but doesn’t have the receipt.  The business owner can enter the customer’s name and see all purchases made.  If this is a repeat customer who spends a significant amount at the business, then it might be wise to return them a favor of refunding.  However, if this is a customer who came once in three months and wants to return the only purchase without a receipt, then the wise answer would be, “No refund; you may have store credit.”  One of the biggest enemies of small retail businesses is they don’t have access to this data.  They have no idea what the profit per hour or profit per customer is.  For this reason our solutions are very crucial.

Some other things to help increase the profit per sale:

• Make targeted offers such as “buy one, get one free” or “buy one, get one ½ off” to increase profit per purchase. What are the high margin items in the business – the merchandise which yields more profit?  A clothing store may make more profit on the shoes they sell.  Therefore, a good targeted offer idea would be to offer a discount on shoes when buying a clothing item.  Think strategically about targeted offers which will help the business owner make more money on each purchase by bundling the right items.
• Get additional customers, specifically new customers, into the store. That is basically free money other than the goods sold.  Example:  The business cost per hour is $60.  Just to open the business is $60 regardless of the number of customers during that hour.  If on average there are three customers per hour who come in and spend $50 average, that is $150 revenue.  The cost for goods sold is $30.  So the cost for that hour is $90.  In this example the business just made $60 profit for being open that hour.  Since the $60 for that hour has already been paid, now the only expense of extra customers would be for the goods sold.

If you’re looking for a company who has technology solutions you can sell, visit CCSalesPro.com.  We’d love to talk to you about joining our team and about the solutions you can provide to your retail customers.

Make it a great day!

James Shepherd

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