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The New Financial Year is a Great Opportunity - part 1 of 1

Published 01/04/2010

Howard Butterfield of theimagefile... offers some more good advice

The prospect of a new fiscal year beginning is a great time to make a fresh start, try and put the challenges of the past year behind us and look again at the way we are working from a financial perspective.

Two of the most important numbers to know for our business are our breakeven point and our enquiry to booking ratio or, lead to sales conversion rate.

Breakeven Point
Our breakeven point is our average monthly fixed costs (or overheads or indirect costs; simply those costs that do not vary with our sales such as rent and rates) plus our average monthly variable costs (or direct costs, as they vary directly with sales, for example, raw materials and shipping costs). Once we have this figure we can then work out how many sales we need to reach breakeven or cover our costs. This is simply average net (without VAT) sales revenue divided by average number of sales. Now, armed with this information we can formulate our sales targets and to spur us on, at this point we realise that, as photographers tend to have very low raw material costs; once we have reached breakeven, we get to keep most of what we can generate beyond that, only having to share it with our darling chancellor of course.

Enquiry to Booking Ratio
Our enquiry to booking ratio is just as important and forms one of the best distinctions between Sales and Marketing I have come across. In essence, Marketing is what we do to generate a lead or enquiry and Sales is what we dofrom that point on. If we generate 10 leads a month and only convert 2 then we need to take a serious look at our sales process and experiment and invent to improve that ratio. Follow up is really important, even if you think you have lost the order, sometimes you will be surprised and if they have booked someone else, ask why they made that decision. You may not like the answer but at least you will know!

If on the other hand we generate 10 leads and convert 8 then that is a very healthy conversion rate, we can't or even shouldn't expect to convert all, as we should have the confidence to turn down work which deep down we suspect is going to be trouble, instead of feeling we need to grab everything we can just to pay the bills. If, in this last scenario we are still looking for more business then we should take a look at our marketing strategies to build the number of leads we receive. As we all know, referrals are without doubt the best way of generating new business largely because the enquiries we receive are to some degree presold. If we know this, then what are we doing to actively increase the number of referrals we receive?

If you do choose to invest a bit more in your marketing you would not be alone; a recent survey from the Forum of Private Business shows that firms are, following months of cost cutting, now increasing marketing budgets as a way of combating difficult trading conditions.

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1st Published 01/04/2010
last update 09/12/2022 14:54:15

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