1
00:00:00,180 --> 00:00:02,940
Hi, Rueben Taylor from Business
Success Educators here,

2
00:00:03,240 --> 00:00:06,930
and in this video I'm going to
share with you the profit engine,

3
00:00:06,930 --> 00:00:10,320
which will enable you to
multiply your profits. See,

4
00:00:10,320 --> 00:00:12,990
most business owners I meet,
they want to make more profits.

5
00:00:12,990 --> 00:00:15,990
They want to grow their business,
but they're not sure how.

6
00:00:16,380 --> 00:00:19,440
But if you understand some of
the key drivers of your profit,

7
00:00:19,980 --> 00:00:23,130
driving your profit engine, you
can actually multiply your profits,

8
00:00:23,370 --> 00:00:24,600
not just add to them.

9
00:00:24,870 --> 00:00:28,560
So I'm going to jump across to my screen
and show you how the profit engine

10
00:00:28,560 --> 00:00:33,330
works. The first thing that your business
needs to do is generate a lead or an

11
00:00:33,330 --> 00:00:37,380
enquiry. You multiply that
by your conversion rate,

12
00:00:37,390 --> 00:00:41,220
which is out of all your enquiries,
what percentage turn into sales.

13
00:00:41,520 --> 00:00:45,240
This gives you your number of customers.
Now, once you have a customer,

14
00:00:45,240 --> 00:00:49,920
your job is to get them to spend more
and more with you each time and coming

15
00:00:49,920 --> 00:00:54,030
back again and again and again.
Which leads to the next two parts.

16
00:00:54,030 --> 00:00:58,950
Your average sale value is how much on
average customer spends with you and

17
00:00:58,950 --> 00:01:02,760
the purchase frequency, how often
a customer will come back, say,

18
00:01:02,760 --> 00:01:07,530
in a 12-month period. Your number of
customers times your average sale value,

19
00:01:07,710 --> 00:01:11,400
times your purchase frequency
-- gives you your revenue. Now,

20
00:01:11,400 --> 00:01:14,100
is revenue the most important
thing in a business? No.

21
00:01:14,100 --> 00:01:16,620
We need to multiply that
by your gross margin.

22
00:01:16,860 --> 00:01:19,350
What's the profit in delivering
your product or service?

23
00:01:19,560 --> 00:01:23,460
This will give you your gross
profit, take off your expenses,

24
00:01:23,640 --> 00:01:27,780
and that gives you your
profit in the business. Now,

25
00:01:27,780 --> 00:01:31,050
people often come to me and they say,
"Rueben, I want more profit" or "Rueben,

26
00:01:31,080 --> 00:01:34,200
I want more sales" or "Rueben, I want
more customers." And I'll say, "Hey,

27
00:01:34,200 --> 00:01:36,900
you can't have them." If
you want more customers,

28
00:01:36,900 --> 00:01:40,800
you either need to generate more leads
or convert some of the business you are

29
00:01:40,800 --> 00:01:43,890
getting already. If you want more revenue,

30
00:01:43,890 --> 00:01:47,760
well then you need to get more customers
by working on those factors or increase

31
00:01:47,760 --> 00:01:51,150
your average dollar sale
or your purchase frequency.

32
00:01:51,450 --> 00:01:52,710
And if you want more profit,

33
00:01:52,800 --> 00:01:56,970
you've either got to drive your revenue
drivers or work on some of your margins

34
00:01:57,510 --> 00:01:58,440
and expenses,

35
00:01:58,950 --> 00:02:02,760
and the thing is with your profit
engine is you'll start to multiply your

36
00:02:02,790 --> 00:02:06,690
profits when you go on these drivers,
not just add to your business.

37
00:02:06,990 --> 00:02:11,460
But the best way to understand this is
to put in some numbers. Let's look at

38
00:02:11,460 --> 00:02:13,710
some numbers in a business now. Really,

39
00:02:13,710 --> 00:02:17,160
really useful if you work out the numbers
in your business and then you can work

40
00:02:17,160 --> 00:02:21,030
out how the profit engine works
in your case. So in this business,

41
00:02:21,030 --> 00:02:24,120
they were generating 400 leads.

42
00:02:24,990 --> 00:02:29,580
Their conversion rate was 33%. So one
in three people were buying from them,

43
00:02:30,240 --> 00:02:32,160
gave them 132 customers.

44
00:02:32,610 --> 00:02:35,730
So once they started measuring
the average sale value,

45
00:02:35,730 --> 00:02:40,200
that worked out to about $1,250. And
this is the average. Some spent more,

46
00:02:40,200 --> 00:02:42,750
some spent less, and this will
be the same in your business.

47
00:02:42,750 --> 00:02:45,600
Some of you'll have a small average
sale value, some will be high.

48
00:02:45,750 --> 00:02:48,600
Same with purchase frequency, some
will be really, really frequent,

49
00:02:48,840 --> 00:02:50,640
like a hairdresser
every four to six weeks.

50
00:02:50,650 --> 00:02:54,330
Sometimes it could be a couple of
years between someone buys from you.

51
00:02:54,330 --> 00:02:59,220
It all varies on your business. In this
case, their purchase frequency was one,

52
00:02:59,500 --> 00:03:02,350
and this gave them a revenue,
and this is a monthly figure,

53
00:03:02,350 --> 00:03:05,170
of $165,000 a month.

54
00:03:05,470 --> 00:03:09,970
Their margins was about 60%. Gave
them a gross profit of 99,000.

55
00:03:10,960 --> 00:03:14,890
Subtract off expenses. Their expenses
were running about $90,000 a month,

56
00:03:15,100 --> 00:03:18,700
which gave them a profit
of $9,000. Not that much,

57
00:03:18,700 --> 00:03:23,530
but these were actual figures of
a business that we worked with. So

58
00:03:23,530 --> 00:03:26,350
let's have a look at, if we
go to work on these numbers,

59
00:03:26,350 --> 00:03:28,240
and I like to play the game of 10%,

60
00:03:28,270 --> 00:03:32,290
what if we could improve each
of these drivers by just 10%?

61
00:03:32,740 --> 00:03:36,370
So the first one, if we improve
by 10%, 400 becomes 440.

62
00:03:37,120 --> 00:03:39,580
For many business this is
about doing more marketing,

63
00:03:39,580 --> 00:03:41,770
introducing more things
you can generate leads.

64
00:03:42,310 --> 00:03:43,990
Those of you who use word of mouth.

65
00:03:43,990 --> 00:03:46,810
What if you had a proactive
referral strategy? In fact,

66
00:03:46,810 --> 00:03:51,550
what if every one of your
customers referred one person
over the next 12 months?

67
00:03:51,560 --> 00:03:56,230
You would actually double your business.
What if only one in 10 would? Well,

68
00:03:56,230 --> 00:03:59,680
then you'd actually get the 10%.
Look at where you're spending money,

69
00:03:59,680 --> 00:04:02,770
look at what you're marketing, look at
what's producing results, what isn't,

70
00:04:02,860 --> 00:04:06,490
and then you can drive it.
Next area is all about sales,

71
00:04:06,490 --> 00:04:11,020
which is the conversion rate. To
improve that by 10%, 33 becomes 36.

72
00:04:11,230 --> 00:04:14,380
This is all about improving your sales
process, your point of difference,

73
00:04:14,380 --> 00:04:17,530
doing follow-ups. Look at
how it starts to multiply.

74
00:04:17,530 --> 00:04:22,450
Our customers have now
gone from 132 to 158.

75
00:04:23,080 --> 00:04:25,090
Now what if you went to work
on your average dollar sale?

76
00:04:25,360 --> 00:04:27,760
Obviously you can play around
with things like your pricing,

77
00:04:28,000 --> 00:04:31,900
but simple way to increase this
is how do we do something like,

78
00:04:31,900 --> 00:04:36,160
would you like fries with that? That
famous question from McDonald's.

79
00:04:36,400 --> 00:04:37,780
Every business has fries.

80
00:04:37,930 --> 00:04:41,170
What else could you be offering your
current customers? Like a lawyer I worked

81
00:04:41,170 --> 00:04:42,640
with just said, "by the way,

82
00:04:42,670 --> 00:04:47,380
have you updated your will recently?"
They would pick up about $10,000

83
00:04:47,380 --> 00:04:51,640
worth of wills every year
by asking one question.

84
00:04:52,000 --> 00:04:56,440
Think about what other things you could
be selling to your existing customers.

85
00:04:57,160 --> 00:05:00,760
If we work on purchase
frequency. So one becomes 1.1.

86
00:05:00,940 --> 00:05:03,460
This is all about marketing
to your current customers.

87
00:05:03,850 --> 00:05:07,780
Talking to buy again and again
and again, reminder systems,

88
00:05:07,960 --> 00:05:12,610
rebooking systems, just ways that
they can do more business with you.

89
00:05:12,970 --> 00:05:14,950
Now, if one becomes 1.1,

90
00:05:14,950 --> 00:05:18,520
our revenue goes from 165,000

91
00:05:19,660 --> 00:05:22,000
to 241,577,

92
00:05:22,390 --> 00:05:24,970
we're starting to multiply
our profit result,

93
00:05:25,360 --> 00:05:28,300
our gross margin 60% becomes 66%.

94
00:05:28,630 --> 00:05:33,370
Well then our gross profit now is 159,440.

95
00:05:33,730 --> 00:05:37,210
Now, expenses we don't want to increase,
we actually want to reduce that by 10%.

96
00:05:37,450 --> 00:05:41,950
Most businesses can do that if you
start to focus on where you are actually

97
00:05:41,950 --> 00:05:45,370
wasting money. Where could you be
more efficient? And in this case,

98
00:05:45,430 --> 00:05:47,140
90 becomes 81.

99
00:05:47,410 --> 00:05:51,880
The profit of this business is now 78,440,

100
00:05:52,270 --> 00:05:56,470
which is a massive 46%
increase in revenue and a

101
00:05:56,470 --> 00:05:59,330
772% increase in profit.

102
00:05:59,840 --> 00:06:04,580
This is the power of the profit engine
because we are working on the drivers

103
00:06:04,760 --> 00:06:07,610
just not working on the end result.
Now,

104
00:06:07,610 --> 00:06:12,170
even if you got 10% in a few areas, some
you might not be able to get the 10%.

105
00:06:12,170 --> 00:06:14,120
Others, you might be
able to get 20 or 30%.

106
00:06:14,360 --> 00:06:19,100
The key is to work out what are
the numbers for you and your

107
00:06:19,100 --> 00:06:23,300
business. So if you'd like some help
in working out your profit engine,

108
00:06:23,480 --> 00:06:25,010
I've put together a template,

109
00:06:25,160 --> 00:06:29,570
just shoot me a message and I'll get that
template across to you. But remember,

110
00:06:29,660 --> 00:06:33,320
your profit engine is the key
to multiplying your profits.

111
00:06:33,530 --> 00:06:36,770
So thanks for taking the time to watch
this video and I'll catch you in another

112
00:06:36,780 --> 00:06:38,240
video soon. Bye for now.