Lots of businesses are doing okay. But they’re not doing well. And that’s a real pity.
I can’t tell you how many business owners attempt to reinvent their business so that they can turn this around. But listen up. You don’t have to reinvent your business in order to make a difference to the bottom line. In fact it can be risky to change everything all at once. I’m going to show you how making Small changes, over time, can make a Big Difference to your bottom line. And it’s much more manageable. Let me show you how using an example:
You sold 10000 widgets a year at R100 per sale. You’d earn R100 000 per year. Now let’s imagine that you make 10% in profit on each widget. Your total gross profit would be R10000. If your overheads cost R5000 per year you’d make a net profit of R5000. (Of course we’ve used simple numbers in this example so that the maths is easy.) Now let’s say that we aimed to make small changes at each step. Let’s say we target a 5% difference. That seems manageable.
WITH 5% IMPROVEMENT
What does that look like?
- 5% more Sales= 10500 widgets per year.
- A 5% increase in the average prices= R105 per sale
- Revenue would now be R 1 102 500
- Gross Margin is now 15% (I know that’s an increase in 5 points rather than 5%, but stay with me. We’re simplifying & even a 5% increase would yield results)
- Gross profit = R165 375
- Overheads increase by 5% to R57 500
- Net profit is now R107 875
That’s more than doubled from R50 000!
See a small change at each stage, makes a huge difference to the bottom line.
So of course the big question is HOW? How do you make these changes. Let’s take this apart.
How to get more sales?
Firstly you get better at your marketing and sales. Even if it’s a small change like advertising more often, making more sales call every day or even working on bettering your selling technique. This can make a difference.
How do you increase the revenue you get per job?
The simplest way is of course to increase your prices. But there are other strategies that you could use. Getting more people to buy more expensive products (upsetting), or to increase the number of items they buy. Anyone ever grabbed that little sharpener or cute book at the checkout counter? That’s increasing the basket size. And it can add a good chunk to your bottom line.
How do you increase you GP%
Honestly this is all about lowering costs now. Targeting the biggest drivers of your cost is the smart strategy. And when you know which ones are the biggies then you can renegotiate or look at sourcing supplies from elsewhere. You might even need to look to reformulate your products so that you’re using cheaper ingredients. So look it’s not that complicated. It will take a fair deal of work. But it is possible. Start with the simple stuff- ,make your own calculations.
CLICK HERE FOR A CALCULATOR that you can use to make calculations for your own business. How? Collect data from your bank statements, quickbooks, wave- whatever software packages you’re using. Or even make some guesstimates to begin.And if you get stuck you always have THE GROWTH CLUB. Book a chemistry session so that we can figure out where we can help.