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Increase Your Net Profit

Confounded concerning why your gross benefit is high yet your net benefit is low?

At the point when the women get them they look genuine. In any case, when folks get shower tans they resemble Magda’s twin sibling from the motion picture “There’s Something About Mary.” Spray tans last around 7 to 12 days. So in the event that you are into this stuff, you need to go each 1 to 2 weeks. That is a great deal of tanning, and that is a repeating settled cost for you. Perhaps that is the place the majority of your cash goes.

Do you ever solicit yourself: Where does all from the cash go? Why do I sense that I have no cash?

You are executing it in your business, isn’t that so? You are getting the business. You think you are taking in substantial income. However, consistently when you take a gander at your net benefit then at your business ledger, there isn’t much trade out there.

Every business owner spends money in 2 areas:

  • The money you spend to produce/provide a service or product, which is costs of goods sold. • The money you spend to keep your business up and running, which is called overhead.

Stay with me here. You really need to understand this. It’s so key to getting a handle on your business money. You will have more clarity. You will feel more in control. You could go to the moon! Seriously.

OK, here is an example . . .

Let’s say you are an event planner and you are planning a business conference for Apple. Your fee is $100,000. You will supply and pay for event production, flowers, tables, chairs, catering, and staff. You plan on all of the expenses costing $70,000. So you plan on making $30,000, or 30% profit. The $30,000 is called your gross profit.

Gross profit = Revenue – Cost of Goods Sold

But the event ends up costing you $85,000. You are over budget. So your gross profit is only $15,000.

You also have overhead to run your business. You have to pay for rent, health insurance, your employee, and telephones for your office. This costs $8000 every month.

Net profit = Gross profit – overhead.

So in this case, your net profit is $15,000 – $8000 = $7000. That’s it, you made just $7,000 off of $100,000 in sales!!! Oy vey. We gotta get this number up.

If we annualize this, your net profit for the year would be $84,000. But the thing is, you left your corporate job where you were making $80,000. So you are basically making the same amount of money. Yes, you have more autonomy, have your own company, and have more flexibility. But you are really making the same amount of money.

So something has to change if you want to increase your net profit. You have 3 choices:

  • Raise your prices
  • Lower the costs to produce the event such as your service or product, or stay on budget.
  • Lower your overhead.

It’s that simple. You make the decision. Then run with it. Just not to the tanning salon.