How Many Sales Do You Need to Make to Hit Your Production Ceiling?
Now we want to sit down and take a look at how many sales do you need to make to hit your production ceiling? So where you sell your revenue streams affects your revenue in a number of ways it determines how much product you have to produce, how many sales you have to make to hit your income goal, and it impacts the types of marketing activities you need to dio so we're talking about your revenue streams you want to acknowledge what percent of your business is wholesale versus retail and this is just going to kind of tell you where you're going to fall in that production ceiling and how many sales you need to hit and so that's our first exercises, I want you to calculate the number of sales you need to hit, too. You should make to hit your production ceiling at both the wholesale and retail level, so in order to do that at wholesale, you take your annual production ceiling and remember for most of us, we calculated are for wholesale our production ceiling at our wholesale price point t...
hat's usually where have you start? Because then retail goes up from there, so take your annual production ceiling that's a dollar about divided by your average wholesale order amount and if you don't have an average wholesale or amount yet if you're still getting going in your wholesale business I like to use whatever your minimum order is it's very different in different industries, maybe five hundred for jewelry, it might be one hundred fifty per stationary take your minimum order amount and at about ten percent to that, and we'll call that your average order now again, if you're already selling wholesale, use whatever you know, your average order to be so we're gonna divide our annual production ceiling by our average wholesale order amount and that's going to give us the number of sales to hit our production ceiling. So to give you an example from our sweet spot here, let's say that their average wholesale order amount with six hundred dollars, and we calculated out that their production ceiling was at one hundred eight thousand dollars. That means one hundred eighty wholesale sales. He had that goal make sense. All right, now a retail that's going to look a little bit different our annual production ceiling, and if you calculated your annual production ceiling at wholesale, multiply times two because that's your retail ceiling and you did it for your retail price. You could just take that number and you're in divide that by your average dollars per sale and that's going to get us the number of sales to hit your productions healing now get if you don't know your average dollars per sale. It typically tends to be a smidge higher than your average product price because you might assume that some people buy more than one product so you can fudge that number. Why looking at your average retail product price plus about ten percent? But spoiler alert, we're going to learn that actually average dollars for sale is one of the things that you should be tracking once you start tracking your numbers so eventually you will know this number more concretely and you can use it from there. So for example, if we go back to our sweet spot, so in this case we could multiply this number times to to get to their retail price, and they're and divide that let's say their average selling price is one hundred thirty dollars, so it's got a calculator hundred eight thousand dollars and all right into this map before one hundred thousand dollars times are times two divided by let's say one hundred thirty dollars gets us to some magic number that no one in this room has a calculated right now but it's a lot we'll just say that ok, so that's how it looks for retail so the number of sales that you need to make equals the number of people that you need to convert so that's I think what's really important to understand is every sale is a person that you have to convert and wholesale requires you to convert a much smaller percentage of your audience. So, in our example, are wholesale. They needed to convert one hundred eighty stores to hit their production seal, take their production ceiling, selling retail. We didn't run the math exactly, but I'm guessing that number is probably about five or six hundred. That is a much larger percentage of people that you have to convert. And in addition to that, wholesale buyers much easier to convert because their job is to buy a product. So that's kind of how wholesale can impact the number of wholesale versus retail, get impact the number of sales that you need to make. Now, of course, most of us are one hundred percent in one way, one hundred percent of the other. So you want to kind of again play with your numbers to see what makes sense for you.