Why Isn’t Your Profit Higher? Let Me Tell You!

You’re a business owner. You take significant risks every day. Your REWARD (your profit) must be worth it.

Being a business owner isn’t easy. It’s not always fun. It’s an unsuccessful endeavour 96 percent of the time (isn’t that a scary statistic?). Our purpose in serving you is to have you be in the four percent of business owners that DO SUCCEED. To succeed, you need profit. And the biggest reason your profit isn’t higher is because you’re not measuring some key numbers.

1. Your different products and services all have different profit margins. You need to measure them. Most struggling business owners who come to me are missing this one fundamental analysis: measure the gross profit margin on every single different type of product or service. Dot it at least once per year, not just one time in the company’s entire life cycle. If you sell LESS of the lower margin products, and MORE of the higher margin products, YOUR NET PROFIT GOES UP. This seems simple, but trust me, it is not getting done in 99 percent of businesses. That’s good news—your competitors probably aren’t doing this! Read on for more competitive advantage!

2. Even if you estimate or quote different products or services with a certain built-in margin in mind—you may not be hitting it. Many business owners also miss this piece: your quotes and estimates are a great place to look for INTENDED profit margin, but what is ACTUALLY happening out in real life, as your products and services are delivered? You need to see the ACTUAL profit margins. You have to measure it! Also, the ACTUAL profit margin is a great thing to assign to someone as a Key Performance Indicator (KPI). This looks like measuring all, or a sample of their work every month, and coaching them on it. Some examples are:

  • A landscape quote versus what actually happened on the job (measure cost of goods including material and labor)
  • A service contract versus what actually happened over the period of service delivery (use your calendar to track)

3. If you’re not LIVING BY your beautiful, amazing, incredible BUDGET, you’re missing out on opportunities for much better profit. Your budget (you have created a budget, haven’t you?) should be the end-all and be-all of your planning. You don’t make a decision without it, and you go to it each and every month with your revenue, costs, and profit. You do this to see if you achieved your goals. Therefore, if you don’t do this, every single month, very thoroughly, you’re throwing away significant profit.

The clients who do this are making 5-10 TIMES the profit of their industry average, and their competitors. On the other hand, the business owners who don’t (unfortunately I see this several times per week) are having trouble keeping their doors open. That budget will be your guidance system: if you didn’t hit one of your goals, for revenue, costs or profit, you go investigating and find the place that either:

  1. needs a new procedure
  2. needs the procedure improved

It is really that simple. That budget is an amazing tool that should be used to measure, analyze and improve your profit.

HERE’S A WARNING YOU MUST READ: IF YOU FIND YOURSELF SAYING “I already know this,” STOP IT! Instead, ask, “Am I really doing all of these things? Am I really doing them consistently?” If you’re not, there are better results to be had!  Go get them!

If you feel you’re ready to make the changes to your business that will make it more successful and more enjoyable, contact TMH Business Coaching today for a confidential, free, no-obligation consultation to propel you forward. Also, please feel free to add yourself to our weekly coaching tips email!

Business can be better™ and it should be!

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Kelli-Rae Tamaki

Kelli-Rae is truly passionate about successful business, and believes it can always be better, which is why she has spent 20 years studying, running, coaching and consulting with businesses, just like yours.
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