“Average Number of Transactions” Calculation
23 Apr, 2020 by David Seamans
The Income formula is:
Income / Revenue = Active Clients * Average Sales Value * Average # of Transactions
This equation reconciles to the company's financial reporting under Income (or Sales or Turnover or whatever term the company wishes to use).
As an example limiting ourselves to one day:
But the business owner knows that if:
Thus we can use specific strategies to improve any of the three components of income.
However, up to now, business has not had the ability to measure these components and if one does not measure, one cannot improve.
How To Calculate "Average Number of Transactions"
The “Average Number of Transactions” is determined by “Number of Transactions” / “Active Clients”.
We use the same data from previous examples ( "see" ) to determine Average Number of Transactions” for the same periods.
In this case, there are 3 transactions and 3 different clients. Average Number of Transactions = 3/3 = 1
This week there are 7 transactions and 4 different clients. Average Number of Transactions = 7/4 = 1.75
This week there are 3 transactions and 2 different clients. Average Number of Transactions = 3/2 = 1.50
Finally, this week there are 11 transactions and 5 different clients. Average Number of Transactions = 11/5 = 2.20
Average number of sales transactions, are exactly that, an average. The differences in averages might not seem like much but when graphed:
|Week 1||Week 2||Week 3||Week 4|
The trend is a very definite and downward slope.