By Anil Puri

As you may know, numbers are an important part of what I do with clients. It’s about helping them understand the numbers better, but also analysing the business and really understanding what’s happening through the numbers. 

What I’ve done here is put a base case, an example business that has $100 of revenue, $50 of cost of sales and $40 of Overhead Expenses. This gives us a profit of $10. I’m going to show you how a 1% increase in sales plus a 1% increase in price plus a 1% reduction in cost flows through and what the final impact of those small little changes are to this bottom line. 

If you look at the difference between that $10 where we started and the $12.41 ending profit, the difference is $2.41 and if you look at that as a comparison to where we started, the 10% profit, that has meant an increase of 24.1%, which is amazing.

It’s amazing how these 1% small increases and changes can lead to a massive increase in your profitability. Now if the starting revenue wasn’t $100 but if this was $1m then that would be $24,000 extra money in your pocket. And as the businesses grows that dollar figure becomes a lot bigger. So go back, have a think about how you can increase your sales, how you can increase your price and how you can manage your costs better, and you’ll have a massive, massive increase in your bottom line.

 

NATIONAL PROPERTY, BUSINESS, TAX-ACCOUNTING & WEALTH ADVISORY GROUP.
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