INCREASE IN SALES IS NOT ALWAYS INCREASE IN PROFIT.

No, you don’t have sight issues. You read correctly, an increase in sales do not necessarily translate to an increase in profit.
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Let me help you understand.
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I am aware that as a business owner, one of the things we run after is making sales. I mean, no sales means no business.
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While you might be running after closing more sales, it is important that you know that you might not be making more money.
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To start with, many business owners do not have a marketing budget (especially small businesses). So what happens when we want more sales is to deep our hands into our profit or even capital in some cases for marketing.
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Whether your marketing leads to sales is another question entirely, but for the sake of this discussion, let’s assume it leads to more sales. But…Heck! You created a vacuum already, you took money out of your capital in the first place ??. In other words, you didn’t exactly increase profit as it were.
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So you could sell a shirt for #2000 to a 100 people and your profit could be #200 per pair. That’s a total of #20,000 in profit. While another person could sell a shirt for #5000 to just 20 people with a profit of #1500 per pair. That’s a total of #30,000 in profit selling to a smaller but laser target market.
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You’ld spend more marketing to a 100 people than you would marketing to 20 people. But the smaller number can be way profitable than fighting for more sales when your profit margin is really low.
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So rather than fight for more sales especially as a small business owner, this is what you could do.
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  1. Serve a specific market; In the example above, you’ld agree that a certain market can afford to buy a shirt for 5k while a certain market will tag it “too expensive”. Some market are flexible when it comes to profit margin increase so long as they are getting value.
  2. Grow your profit margin; This is basically a measure of your profitability. Google is your friend, read about it.
    Some business owners fix 50% of cost of product as their profit, some 100%. The important thing is that customers get value for money. Some customers have conquered price, know this now.
  3. Have a marketing budget; Rather than deep your hand into your revenue for marketing, start saving a percentage of your profit for marketing. Safe in bits as you make profit and plan for marketing. You’ld be shocked when it’s time to pay the ad guy.
  4. Gradually fight for more sales; Oh! You thought you don’t need the “more sales”? No na! You sure need it too but make it gradual. Increasing sales will make more sense after you grow your profit margin significantly.

With this few points of mine, I hope I’ve been able to convince you and not to confuse you that more sales is not equal to more profit all the time. #lol.
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Happy New Month and cheers to your success.

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