How More Sales Accelerate Your Profit

When you increase sales, you do more than push up gross profit incrementally. You accelerate your profit.

It isn’t easy. It takes a good product, smart marketing, hard work, and data.

What does it mean to accelerate your profit?

Accelerate Your Profit By Doubling Sales

Even under a conservative scenario, doubling your sales will triple your gross profit.

Let’s suppose you’re in the first year running a brand new company.

A few suppliers sell you the components you need to make your product. You assemble the components and package your product in a leased warehouse.

A 3PL partner helps with distribution. This year you only have retail trading partners, perhaps, but you’ve developed a solid, enthusiastic customer base.

Now imagine that you make $1 million in sales in year one. Let’s say the cost of goods sold is 70% of revenue.

This means you spent $700,000 on buying, assembling and packaging the components into your final product. It leaves you with $300,000, and if you subtract another $200,000 for overhead, you end up with $100,000 in pre-tax gross profit.

Now let’s say you double your sales in year two. Your revenue is now $2 million. Your COGS, still at 70%, comes to $1.4 million, leaving you with $600,000.

Assume your overhead increases by 20% over the first year, you’ll have $240,000. Subtract that from $240,000, you’ve accelerated to $360,000 in gross profit.

That is more than three times what you grossed in year one.

It’s Easier to Do With Data Reports

The above scenario isn’t far-fetched. We’ve seen companies do this.  There are several ways. You can double:

1. Product price, selling to the same customers;
2. Number of sales, through existing channels;
3. Or the number of channels.

Knowledge will be key to doubling your sales.

Sales reports on location, individual customer, product SKU and many other metrics will help.

Knowing what products sell best will help you decide where to put your focus.

The best way to grow your sales is to use a system with robust, real-time reporting across an entire supply chain.