Profit per deal
How much is left of the deal amount after the direct costs of delivering it: materials, contractors, commissions.
In plain words
Profit per deal is what is left of the deal amount after the direct costs of delivering it: materials, contractors, commissions. It shows what a sale actually earns once those bills are paid. Two deals with the same amount can earn very different money if one needed a contractor and the other did not.
Revenue is the sum of won deals in the period, from the CRM. Direct costs usually live outside it, in supplier and contractor invoices. Add a field for them on each deal, or pull them from accounting by order number. The number of deals is the count of the same won deals. Subtract the costs from revenue and divide by the number of deals. Example (invented numbers): in the worked example, $9,000 of revenue minus $6,300 of direct costs leaves $2,700 across three orders.
Formula
Profit per deal = (Revenue − Direct costs) ÷ Number of deals
Direct costs: materials, contractors, commissions.
Worked example (invented numbers)
Revenue $9,000, direct costs $6,300 across three orders: $900 per deal.
How to use it
Review profit per deal monthly, once the month's costs are in. The owner and the head of sales look at it by product, by channel and by seller. Discounts and extra work show up here before anywhere else.
It shapes what you sell and how you discount. A seller who wins many deals with deep discounts may bring in less profit than one who wins fewer. Set a discount limit from it. A starting rule to test for a month: a discount must leave the deal profitable.
Two neighbors build on it. LTV multiplies profit per deal by purchases per customer, and CAC is compared with it to see whether a new customer pays back on the first sale. Average deal size shows only the revenue side.
Common mistakes
- Treating average deal size as profit. You keep only what is left after direct costs, so subtract them before you judge a deal.
- Including fixed costs such as rent. Rent does not change with one more deal. Leave it out of profit per deal and count it separately.
- Forgetting commissions. Seller commissions and partner fees are direct costs of the deal; leave them out and every deal looks better than it is. Write in the CRM field description which costs count as direct.
- Matching costs and revenue from different periods. Take the costs of exactly the orders you counted in revenue.
Questions
How is average deal size different from profit per deal?
Average deal size is revenue for the period divided by the number of sales. Profit per deal is what is left of the deal amount after the direct costs of delivering it: materials, contractors, commissions.
NEXT STEP · TOOL
By Friday, the owner and the head of sales take last month's won deals and write the direct costs next to each: materials, contractors, commissions. If the CRM has no field for this, add one. Calculate profit per deal for the month. Then find the three deals with the lowest profit and work out what did it: the discount, the extra work or the price. Write the answer next to each deal; the next review starts there.
Which numbers to check every week, with one definition for the whole team.