Profitable Small Business
starts with this equation...

To run a profitable small business, we must look at how net profit is really created.


When asked what business are they in, most people will answer the question from the point of view of the products or services they offer. However, if you are to answer from the net profit equation point of view, you will realize that you are in business for net profits, and hence are in a profit making business.

Understanding the Net Profit Equation

Let's break down this Net Profit Equation into its components and try to understand how net profit is really created.

1) Traffic
This is the number of potential customers that makes an inquiry about your business. It can be the number of visitors that walked into a bookstore. Some may buy a book while others may just browse some books without buying any. This is the total number of people coming into contact with your business.

2) Conversion Rate
This is the percentage of potential customers that ACTUALLY buys something from you. These people become actual customers. In fact, traffic multiply with conversion rate will give you the number of customers. Offering discounts or giving away freebies with purchase are some ways to increase conversion rate.

3) Dollar Per Sale
This is the average dollar value of each sale. When you buy a McDonald value meal, the cashier will surely ask,"Do you want to upsize?" or when you visit a petrol station and are paying for petrol, the cashier will surely ask,"(Do you want) Promotion items?". Short questions like these have an amazing effect on increasing dollar per sale.

4) Number of Repeat Sales
This is the number of times the same customer buys from you. Running a loyalty program like Coffee Bean's "Collect 10 stamps and Get Your Next Cappuccino Free" is a tempting incentive for customers to buy repeatedly from you.

5) Profit Margin
This is your profit margin. Putting in place effective cost control measures is one way to increase your profit margin.

NetProfitQuest Marketing Strategy

By breaking down the "net profit equation" into its individual components, you will be able to see clearly which areas your business is functioning well and which areas are the bottlenecks. If you can understand these components of net profit, you are already better off than 80% of the people out there who has no idea how to run a profitable small business!

When you combined the understanding from "How to Start a Business" and the "net profit equation" above, you'll see a powerful marketing strategy that will literally make your product fly and increase your net profit.

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