Return on sales shows how efficiently the company operates. High return on sales – things are going well, advertising is paying off, the company is making a profit. Low return on sales – it’s time to determine what’s wrong.
Return on sales – calculation
There are different approaches to calculating sales profitability . This is due to the fact that different profit indicators can be us as initial data:
Return on sales by net profit
R = Net Profit / Revenue * 100%
Return on sales by gross profit
ROS = Gross Profit / Revenue * 100%
In the classic formula for return on sales, the resulting value is multipli by 100%, and profit is understood as net profit – after ducting taxes, operating expenses, securities transactions, and profit and loss indicators from participation in the work of other companies.
The data for calculations are taken from the accounting report. In this way, general data can be obtain. Profitability can also be calculat in relation to specific goods or groups of goods.
ROM = net profit from sales / cost price * 100%
Profitability
What influences the profitability of product sales?
The profitability indicator is influenc by dozens of different factors. They can be divid into external and internal.
External factors include the economic situation in the region and country, the presence of competitors and their actions, and demand. External factors are usually difficult to change, and the organization adapts to them. An important external factor for modern business is the sanctions policy of Western countries and the associat emphasis on import substitution, instability of the national currency, and other factors.
Internal factors – working conditions at the enterprise, features and effectiveness of advertising campaigns, logistics costs. They can and should be manag.
In general, to increase sales profitability, a company must ruce production costs and increase revenue.
Profitability of product sales is the norm
The higher the sales return rate , the better, but there are no uniform standard values. Therefore, it is customary to use average data:
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1-5% – low profitability, the enterprise operates inefficiently, it is necessary to find problem areas and make urgent changes to planning and operational activities;
5-25% is the average profitability rate, which indicates the stable operation of the organization;
Above 25% – high profitability, the company operates stably and offers competitive products.
Calculation of sales profitability
Often, the profitability of sales is calculat within argentina phone number material the framework of one project. For example, a company has enter into a contract for the production and delivery of a certain product. As a result, the profitability of its sales is calculat.
The more specific the calculation, the more opportunities it has to be us for analysis and changes to operational processes. For this reason, if the phone number mx enterprise is large and has a wide range of products, it is possible to calculate dozens of profitability indicators, focusing on different products or different advertising campaigns. In this approximation, the calculation is similar to the calculation of ROI – return on investment .
You can also calculate the overall profitability indicator of the company. In this case, it will generally demonstrate the efficiency of the enterprise. Usually, this value is us in presentations, distribut in the mia, and more segment indicators are us for the internal nes of the company.
How to increase sales profitability?
Track the effectiveness of advertising campaigns, use different promotion channels – social networks, messengers, contextual advertising, SEO;
Don’t get ti to one supplier or ask for a bulk discount, because the main cost item is almost always the price at which you purchase the goods;
Calculate not only general profitability indicators, but also for a specific product or group of products;
Ruce costs and expenses;
Improve your customer support, ruce delivery times, and build word of mouth awareness.
Why is it worth increasing sales profitability?
It may seem that a static indicator of sales profitability, the value of which does not change, for example, 18%, indicates the stability and prictability of business processes.
This is true, but only until stable demand is ensur or some initiatives are implement by competitors.
Therefore, even a profitable organization should always see opportunities to ruce costs and expenses, purchase a product or products at lower prices, and use effective advertising channels.
How to evaluate advertising?
Marketing cost management gives you a complete picture of all your business’s advertising campaigns. Evaluate ROI, CPC,ROMI+60 metrics, as well as sources of requests, help to understand which channels are most effective. Analyzing the data is not difficult, but you do not want to waste valuable time on bringing together multiple tables.
End-to-end analyticsprovides access to a full report from all traffic sources, displays them in the form of dashboards, graphs and funnels. Automatically brings together deals and leads from CRM, call tracking and Yandex.Direct.
Advertising evaluation algorithm:
In addition to the quality of the ads, study the conversion from a visit to the site to a lead;
See how many of them were target;
Look at the number and amount of sales from each source.
Summarize lead statistics and their cost, across all sources
Advertising effectiveness analysis
Advertising effectiveness analysis
Often, the number of leads gives a false impression of the effectiveness of advertising, so it is necessary to take into account all cost and revenue metrics.
