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How to Calculate "Average Sale Value"

27 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: $1 Revenue RGB146-32-145

But the business owner knows that if: $8 Revenue corrected

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 Sale Value"

"Average Sale Value" is the easiest handle to determine and verify outside of Elements.

Simply add up the invoices raised in the relevant time period subtract the total of adjustment (credit) notes and divide by the total number of transactions.

We use the tables we had in “Active Clients” to determine Average Sale Value for the same periods.

Week 1

Transaction # Date Client Amount
1001 13/10/2018 Smith $95.00
1002 14/10/2018 Brown $1,100.00
1003 15/10/2018 Wyatt $155.00
Total 3 Transactions $1,350.00

Average Sale Value = $1,350 / 3 = $450.00

Week 2

Transaction # Date Client Amount
1004 20/10/2018 Smith $100.00
1005 21/10/2018 Jones $200.00
1006 22/10/2018 Smith $55.00
C/N 345 22/10/2018 Smith -$80.00
1007 22/10/2018 Brown $150.00
1008 24/10/2018 Green $110.00
C/N 346 24/10/2018 Green -$10.00
Total 7 Transactions $525.00

Average Sale Value = $525.00 / 7 = $75.00

We have seven transactions (each transaction increments our count by one). The invoice transactions total $615.00 less the adjustment (credit) note amounts ($90.00).

Week 3

Transaction # Date Client Amount
1009 27/10/2018 Brown $65.00
1010 28/10/2018 Brown $1,100.00
1011 29/10/2018 Wyatt $155.00
Total 3 Transactions $1,320.00

Average Sale Value = $1,320.00 / 3 = $440.00

Week 4

Transaction # Date Client Amount
1012 1/11/2018 Brown $100.00
1013 1/11/2018 Wyatt $200.00
1014 2/11/2018 Smith $55.00
C/N 347 2/11/2018 Green -$80.00
1015 3/11/2018 Brown $150.00
1016 3/11/2018 Green $110.00
C/N 348 4/11/2018 Green -$10.00
1017 4/11/2018 Green $215.00
1018 5/11/2018 Green $250.00
1019 5/11/2018 Wyatt $50.00
1020 5/11/2018 Black $500.00
Total 7 Transactions $1,540.00

Average Sale Value = $1,540.00 / 7 = $220.00

We have seven transactions (nine invoices less two credit notes). The invoice transactions total ($1,630.00) less the adjustment (credit) note amounts ($90.00).

David Seamans

Co-Founder at Elements, Retired CPA and Company Coach with 35 years of experience building better businesses.