Business Tips From An Accountant
Accounting has to be one of the most boring professions out there
. Until you realise a good Accountant doesn't just do your accounts and charge you fees for their necessary evil.
No, a good Accountant not only saves you money, but makes you money, too.
So, without getting too boring and technical about profits, losses, margins and balance sheets, let's simply look at the stark reality of your business's bottom line. Difficult as it might be to believe right now, there are actually only four ways to add to it and in doing so boost your profits.
And no matter how hard professionals, experts and gurus might try to make it seem more complicated than it is so they can sell you expensive consultancy and other products and services, it all boils down to just four fundamentals:
1. Sell more to the people you're already selling to. This is by far the easiest sale you're ever going to make. But it still has a cost attached to it.
2. Attract more people to sell stuff to. This is more costly than selling to your existing customer base and is less predictable and much more difficult.
3. Sell at a higher price. Easy. Just raise your prices.
4. Lower your costs. Almost as easy as No. 3 and even more profitable.
This is all really quite obvious once you give it a bit of thought.
What I do find surprising is how most business owners put all their time and energy into the first two - selling more stuff and looking for new clients and customers to sell stuff to - when the last two are the easiest and cheapest of the lot.
I think I'd better explain.
Pulling in new business, or even selling more into your existing customer base has a cost of its own: your cost of making the sales, marketing costs, your other variable costs and fixed overheads, and of course the cost of the supplying the goods or providing the services themselves.
Crunch the numbers, and you can reasonably expect something like a 35% margin across the board. The numbers vary across businesses and industries, but 35% is about right for most businesses in most industries most of the time.
But selling at a higher price... is as simple as putting up your prices. You can do it just like that... and it won't cost you a penny.
Yes, I know you might worry you'll lose all your business... but you really won't. Many of my clients have done this on my advice, and not once has any of them lost business. On the contrary, their profits went up, even in the Recession.
The reason price isn't usually an issue is people are more interested in the value of what you're offering, not the price you ask for it (for example, it's unlikely you'd go for the cheapest heart surgeon to do your double-bypass just because he was cheap).
And even if your customers and clients do notice, and even if you do lose some business... it's really not a problem. I don't want to get into the calculations here (although I can do if you're really interested) but just take it on faith for now that if you have a 35% margin a price increase of just 10% boosts your profits by an amazing 37%.
Or if you want to see it in perhaps rather more attractive terms, even if you lose 34% of your sales volume and close for business on Thursday lunchtime instead of Friday afternoon... you'll still be making the same profits (but with a long weekend every week). Making the same money for less work sounds like a good idea to me! That seems like a good deal to me).
On the other hand, cutting your prices is deadly. Because a price cut of 10% on that 35% margin slashes your profits almost in half, meaning you've got to work twice as hard just to stay exactly where you are.
Truth is, most businesses would struggle probably beyond the point of collapse if their sales-volume doubled - both quality and service would go out of the window. Worst of all, all your competitors then also cut their prices in a pointless "price war", meaning you're back exactly where you started relative to them, only you're all now working harder for the same money and getting more fed up with it all.
Now, cutting your costs: with a margin of 35% you've got to sell 135 Euro of products and services to make a profit of 35 Euro. All this takes you time, effort and expense, plus wear and tear on equipment and your sanity.).
But if you can save that 35 Euro by cutting costs, which is really very easy to do because most businesses don't actually think about their expenses in this way and so haemorrhage money through gaping holes in their financial structure, then you've achieved exactly the same result only without all the bother and effort of having to sell more of your products and services.
So now do you think accounting is just boring number crunching?
No, I thought not.
by: Jon McCulloch
Essential Tips to Starting a Business Flipping Real Estate: Ensuring The Success Of Your Business Payday Loans With No Teletrack Quick Cash Approved With No Credit Check. Studying for a Career in the Fashion Business Cash Loans Bad Credit-disregard Bad Credit Contract Loan Take Control Of Your Business Website Website Design, Finding The Right Solution For Your Business Fast Unsecured Loans: Grab Fast Cash Without Collateral Opt for Full Color Brochures for Your Business How to Create Business Opportunities as an Entrepreneur Tips On How To Nab Inexpensive Fort Lauderdale Air Rate Designed Business Owners Couples Family Memb Business Growth and Increase profit by knowing your customer - HappyUnhappy Why It's Essential To Build Your Business Website