Attention business owners! Are you aware of the benefits small changes in three key areas of your business can result in a HUGE increase in your net profit?
| Before $ | After $ | |
| Sales (up 5%) | 1,000,000 | 1,050,000 |
| Cost of Sales (Reduce 5%) | 700,000 | 698,250 |
| Gross profit | 300,000 | 351,750 |
| Overheads (Reduce 5%) | 200,000 | 190,000 |
| Net Profit | 100,000 | 161,750 |
|
Increase by $61,750 or 61.75% |
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Take the three primary financial components of your business:
- Sales
- Cost of Goods
- Overheads
Increase Sales by 5%
You may ask “How do I do that?”
There are three main methods of increasing sales:
- Increase your customer base
- Increase the amount they spend
- Increase the times they return
If you could increase each one of the sales areas by only 10% over the next 12 months, you would increase sales by a strong 33%. For example, if a customer came in to your store 10 times per year, and you or your sales team could encourage them to visit one more time in that year, there is a 10% increase. If they buy a $10 item and you up sell, cross sell or add on sell a $1 item to them that is another 10% increase. So achieving a 5% increase in sales is not that difficult. Increasing prices is normally a method simply to keep up or ahead of inflation.
Reduce Cost of Goods by 5 %
You say “No way, that is too hard”.
How well have you negotiated your current purchase price of your products? What package deals have you arranged? What payment system have you organised to reduce costs? Have you joined or established a local buying group to increase your buying power? There are many more ways of making small changes to save the costs
Reduce Overheads by 5%
Too difficult?
When was the last time you as a business owner sat down and seriously pulled your overhead costs, contracts and agreements apart and searched or negotiated for alternatives, explored all options, and attempted to save in these areas of the business?
The key message to business is that there is a large amount of hidden profit within your organisation. Explore these three areas and improve them by 5% and you will gain an increase in profit by over 60%.
As a business owner it is well worth taking one day out of your busy schedule to work on your business and not in it.
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