Brad Sugars: Startup Basics
8 Tips for Increasing Your Average Sale
Getting a few more dollars out of each customer can put startups on a fast track to success.
By Brad Sugars | March 27, 2008
Walk into any McDonald’s, order a Quarter Pounder, and the clerk will invariably ask, “Do you want fries with that?” Each affirmative answer adds $1 or more to that particular sale. If just a fraction of McDonald’s’ 54 million daily customers say yes to that question, that’s millions of extra dollars in the burger biggie’s pocket.
The same strategy is important for startups. You haven’t yet built a large customer base, so you need to coax as much money as possible from each person who does show up. It’s the old story: A bird in the hand is worth two in the bush.
The issue at this stage isn’t market share but wallet share. Boost the dollar value of your average sale, and you boost your cash flow and bottom line. Here’s how you can bring in more of those sales.
1. Crunch the numbers. Begin by figuring out the dollar value of your average sale. If you have 20 customers and total sales of $1,000 on a typical day, your average sale is $50. Then you can set a new target and plot your strategy to hit it.
Depending on your business, you might also want to calculate your average sales per hour, day of the week, employee, location, marketing campaign or other variables. Frequently the answers will lead directly to a plan of action. If your numbers are low on Mondays, for example, you can plan special Monday promotions. If one ad typically brings in a $2 sale and another weighs in at $12, you can adjust accordingly.
2. Change your product or service mix. Adding or subtracting to what you sell can help grow your typical ticket size. Take the case of a bakery that had an average sale of just $5. The problem was they offered virtually no higher-priced items. When they added specialty cakes and other premium goods, that figure jumped to $14.
The same effect can sometimes be achieved by dumping lower-priced products. If you sell three different toasters, drop the $35 model and the customer will spend $45 or $55 instead.
3. Bundle your offerings. Encourage customers to spend more by giving them a package deal on multiple products or services. At McDonald’s, the bundles are Extra Value Meals that include an entrée, fries and a drink. At a car repair shop, it might be a tune-up and lube job rolled into one visit.
You can also bundle your time. One computer repair company that wasn’t making enough money charging by the hour started selling services in 10, 20 or 30-hour blocks. That new option yielded higher average sales and ensured return business.
4. Go for the add-on sale. “Do you want fries with that?” is a textbook example, but the same approach works for any business. One attorney I know started asking whether every client had an up-to-date will. Two out of three didn’t. The result was an extra $4,000 in average weekly billings. Later he repeated the feat with living wills.
Another way to drive add-on sales is to create a checklist of related products for a particular kind of purchase. If you’re a hardware store, a paint customer might also need brushes and drop cloths. Hand him a checklist and he’ll likely walk out with more than a can of Antique White.
5. Create weekly or monthly sales challenges. Focusing your sales team on a particular area for a week or a month can also generate add-on business. When I owned photocopy shops, we pushed colored paper one week and banners the next. Some grocery stores offer specials at the checkout counter to trigger impulse sales.
6. Take hidden products or services out of the shadows. I once coached an insurance broker who sold only 1.27 policies per customer despite offering more than 14 types of insurance. A survey revealed that most clients didn’t know he sold those products. He was failing to show his entire hand. Signage, newsletters and other tactics can help.
7. Train your staff to make the higher dollar sale. Sometimes simply making personnel aware of your target sale value will help you get there. If they’re just selling what the customer came in for, you’re not going to hit your numbers. Tell them what you’re looking for, and then give them the tools to achieve it.
8. Raise your prices. If you’re just opening your doors, price your products or services on the high side and figure out how to offer more value. Being the cheapest isn’t necessarily going to pay the bills, and you’ll be left high and dry when a competitor beats your price.
If you’ve been in business for a while, don’t be afraid to bump up your prices by 5 or 10 percent. Most customers won’t care (You don’t stop going to your local Starbucks or your hair salon when they raise their rates.) and you’ll increase your margins, so a few lost customers won’t make a difference.
By using tactics like these to maximize every transaction, you help keep the cash flowing while you’re getting your business off the ground. Once you’re airborne, these same strategies can develop your flight plan for generating peak profits. Master the art of supersizing your sales early, and it will pay off many times over.
Brad Sugars is Entrepreneur.com’s Startup Basics columnist and the writer of 14 business books including The Business Coach, Instant Cashflow, Successful Franchising and Billionaire in Training. He is the founder of ActionCOACH, a business coaching franchise.
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