What I want to talk about today is something that came about after a conversation with one of our clients just recently, who was going through the process of applying or nominating for small business awards. One of the questions they had to answer was what their goals were for the next 12 months. And their goal was pretty audacious. It was a big target of increasing their profitability by a huge percentage.
The way they were planning to achieve this target was really doubling down and focusing on increasing their sales. And it’s true. If you can increase your sales by a big percentage, then your profitability will improve too.
But there’s definitely an easier way of doing it. And that’s what we want to talk about today. To help explain or highlight this concept, we’ve actually created an online tool, so we’ll share that with you now.
Unveiling the “Profit Powered-Up Calculator”
We’re calling it the Scott Aussie Profit Powered-Up Calculator. It’s online at the moment. You can feel free to use the tool and have a play with it yourself, and if you do, rest assured that the way we’ve set it up, all of your inputs and the results are completely private.
We don’t record any of them. They’re not shared with anyone else. It is 100% for your eyes only, but the benefit of it is it really highlights this concept that small, incremental improvements across six different areas in your business can have a huge impact on your bottom line.
The Six Critical Business Levers
Those six areas are audience reach: How many people are aware of your business in any way? Of those people, how many of them engage with you in some way? That could be joining your email newsletter, downloading something off your website, or making an inquiry. Of those engaged people, how many of them actually convert into a booking?
When we created this tool, we’ve done it from the point of view of accommodation providers, but it doesn’t matter what element of tourism and hospitality you’re in, the fundamental principle is still the same.
You might just have to change some of the terminology. How many of those people made a booking? When they do make a booking on average, what do they spend? We’ve plugged in $500 there as a sample. We’ve populated all the fields with sample numbers, and I get it – they’re not necessarily realistic – but it’s just as an example.
The real benefit in this is when you’re gonna jump online and plug in your own values and you’ll see the difference it makes. We are saying the average guest spend is about $500. That could be one night’s accommodation. How often do they come back each year? And of all the money that your business collects, what percentage of it do you get to keep?
The Magic of Incremental Improvements
Again, I know these numbers may not be realistic. Every business is different. It’s important to jump online and have a look at the tool yourself. But over the next couple of weeks, we’re gonna dive a bit deeper into each of these six different elements of your business and we’re going to highlight the strategies and the techniques that you can implement in your own business to push for that five or 10% increase in each of these areas.
For example, if you’re looking for a 10% increase in your booking rate, we’re not suggesting in this example you go from 25% to 35%. We’re talking about a 10% increase of what you already have, which is going from a 25% booking rate to 27.5%. That feels a lot more achievable than doubling your booking rate or doubling any individual element of your business.
But in this example, like I said, we’ve plugged in some random numbers, and if we were to scroll down a little bit, you can see based on those numbers there, this business has a profit each year of $100,000, which isn’t huge, but it’s better than a poke in the eye.
But by increasing each of those areas by just 10%—again, going from $500 average guest spend to $550 with just a small upsell, or encouraging people to come back a little bit more often so that your repeat visit frequency goes on average from 2 to 2.2—it results in an increase of profit of $77,000. So you go from $100,000 to $177,000. It’s huge.
Your Next Steps to Supercharged Growth
What we’re looking at is highlighting how these small, incremental improvements in your business can make a huge benefit. That’s what we’re gonna cover over the next couple of weeks. So stay tuned because next week we’re gonna have a look in more detail at how you can increase that audience reach—increasing the number of people that are just aware of your business in any sort of way.
Have a play with the tool. And as always, if there is anything that you’re looking for assistance with, there are plenty of resources on the Scott Aussie website. And if you need someone to help you through it a little bit more, that’s what we’re here for. Have a play with the calculator, and I’ll see you next week.
