3% Changes Are HUGE!
I’ve written elsewhere in these pages about “the four stages of cash sufficiency,” but I didn’t tell you in that article exactly how to get more cash. Here’s one way.
But instead of beginning with the story and then showing the proof, I’m going to begin with the proof. Admittedly, the consulting client I developed this for is one of the largest I’ve worked with in terms of gross sales, but their profits were below many of the sole practitioners I work with. So I worked with them to impose a “3% turnaround.”
See if you can figure out, 3% of what?
Before
Sales $5,515,564
COGS $4,371,351
Gross Profit $1,143,213
Expenses $1,092,977
Net Income $ 50,325
After
Sales $5,680,000
COGS $4,371,351
Gross Profit $1,308,865
Expenses $1,060,187
Net Income $ 248,677
What I did with this client was help them to impose pricing discipline and enhance their unique differentiation to clients. They moved from simply competing on price, to taking the time to persuade and sell, and to convince clients that they were worth paying a small amount more for—3% more to be exact.
The increase in sales show in the two scenarios above is solely due to a 3% increase in price, and a 3% reduction in expenses.
The result of these two 3% improvements was an increase to the bottom line of 394%! Think that was worth it? I do…
Why don’t you learn to do this math with your own projections. Notice that I didn’t even consider the possible savings of 3% of purchasing costs. That would have made this example even more stark. Once you do scenarios like this, the result is often so profound that the incentive to make the changes is hard to ignore.
