ImagesMagUK_October_2021

76 images OCTOBER 2021 www.images-magazine.com BUSINESS DEVELOPMENT KB P rofit is not a dirty word. For businesses, it is good to be profitable. But for many companies in this industry (yours, perhaps?), the owners and leaders do not know how to calculate profit, how to increase profit, or even how to think about profit. This conversation is all too familiar in this industry: Me: “How are your sales this year so far? Are you hitting your goals?” Shop owner: “We’re doing really great! We’re on track to have our best sales ever!” Me: “That’s incredible! What’s the profit on that?” Shop owner: “What do you mean?” Me: “Bottom line, how much money have you made?” Shop owner: “Oh, we don’t know that yet. We’re waiting until the end of the year to determine how much money we’ve made.” Me: “Huh? Why don’t you know this?” How to calculate profit Yes, I know you know this. Or are supposed to know this. Maybe you want to know this. Here it is anyway. There are three types of profit margins in a business: Gross equals the total revenue minus the cost of goods sold. Operating equals the total revenue Howto find more profit Having a firm grasp on figures is essential if you want to succeed. Marshall Atkinson explains the importance of measuring profit and why establishing a system for this will improve your bottom line minus the cost of goods sold and operating expenses. Net equals the total revenue minus the cost of goods sold, operating expenses, interest, taxes, debt repayments, and any other outgoing expenditures. First, determine your total revenue. That is all of your sales. Then, subtract your costs (see above for gross, operating, or net). What is left is profit. Revenue - costs = profit. If you divide the profit number by the revenue number you will get your profit margin. Multiplying that profit margin number by 100 will give you the profit margin percentage. For example: Total revenue = £536,453.27 Total costs = £401,792.45 £536,453.27 - £401,792.45 = £134,660.82 in total profit £134,660.82 ÷ £536,453.27 = 0.251 0.251 x 100 = 25.1% profit margin Question for you The numbers in the example above could be per week, per month, per quarter, or per year. They are just numbers I’m using to explain. My question for you is, do you know yours? Right now? Many of the shops that I’m talking to when they reach out for help do not know these numbers. Instead, I get fumbling excuses as to why they don’t have them. Top-line sales (revenue) is one thing. But the bottom-line sales (profit) is where your focus should be. As my good friend Mark Coudray says, “Top- line sales are vanity, bottom-line sales are sanity.” Increasing your bottom-line profit is more than just what it costs you to operate. Growing that is all about operating more efficiently. How to boost your profit There are three easy ways to increase profit: 1. Raise prices 2. Lower costs 3. Increase efficiency For this article, we’re going to focus on number three. Increasing efficiency. Simply put, this is getting more things produced quicker, easier, and with less work. The more jobs you can produce a day with the same basic overhead costs, the cheaper it is for you to run your company. Hence, more profit. Another question for you So, are you tracking this? Do you know your numbers? Yeah, I know. It’s that maths stuff again. Not as fun as decorating shirts, or closing a deal with a customer, but just as crucial. In fact, many people operating businesses in this industry are simply