Now is a perfect time to do a quick check on your company and give yourself a MAJOR profit bonus before the year ends. It’s really easy to do and it gets you looking at everything that affects your bottom line…That’s the money you take home!
Often times business owners looking to increase sales or major marketing strategies to increase their profit. Yes, these things are great but they take time and resources. To boost your profits before the end of the year, you need a strategy that is quick, cheap, and highly impactful.
Take a look at my quick 5-5-5 strategy and it can be done in as little as an hour. This strategy is super simple and easy to do.
Reduce Your COGS by 5%
The cost of goods sold are the expenses that are directly tied to the production of your product or service. Even though this number adjusts with your production numbers, it has a huge impact on your gross profit margin. Take a look at inventory, suppliers, waste, and returns. If you deliver a service, then look at your contractors and your direct team for inefficiencies. A 5% reduction is really easy to do when you combine everything that goes into your offer. Time to go through your production numbers.
Reduce Your Fixed Expenses by 5%
These costs occur whether you make a sale or not. Rent, utilities, non-production team, and subscriptions can be reduced by negotiations. Your owner’s expenses that you run through your company can be a killer to your profit margin. Yes, you can run your ‘lifestyle’ through your company for deductions but it truly affects your profit. Combine them into your salary and note what you are actually paying yourself. Still many ways to reduce costs here.
Increase Your Price by 5%
Many companies fear raising prices for fear that the customers will leave. This may happen for a few but a very large number of customers will stay and pay the price increase. The easiest way to increase prices comes at the beginning of the year. At the end of the year, you can do a stock-up sale at lower prices. Another way to feel better about the price increase is to ensure that your perceived value is higher than the price. You may also offer an additional no or low-cost item of value to your product. An example might be online training or educational information that helps them use your product or even better, upgrade to the latest model or offer.
The real value here in the 5-5-5 is not that it will save you 3 x 5 = 15% but the compounding effect is actually a 45% increase in your profit margin. Here’s what it looks like:
Go through your financials, bank statements, and credit card statements. Ask yourself these 3 questions:
1. Does this cost get me a new customer?
2. Does this cost keep my customer with me?
3. Does this cost increase the lifetime value of my customer?
If the answer is no…You probably don’t need to the expense on your books and you should probably cut it out.
Marcia Riner is a business growth strategist and the CEO of Trajectory Consulting. She helps small business owners to increase profits, drive growth, and to be in a great position to sell it someday. Together, she helps you create your roadmap to increase revenue, drive growth, and maximize the value of your company. Check out her website @www.TrajectoryBiz.com
In her book The Profit Accelerator, she provides 12 Ways To Dramatically Increase
Your Revenue, Profit, And Value. Download her book for FREE at https://trajectoryprofits.com/book-download/