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:
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 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.
Average Sale Value = $1,350 / 3 = $450.00
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).
Average Sale Value = $1,320.00 / 3 = $440.00
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).