Creating Your 2020 Profit Plan

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I am always telling my business owners that they need to have a profit plan. I have seen many different profit plans including a few that were drawn up on the back of a cocktail napkin. Of course, if you want to achieve massive profits you will need a more organized method.

In this video I discuss the system I use. I have developed the following system after trying many different options taught by other business gurus. One advantage of this system is that business owners can easily understand it and implement it.


Start by creating a spreadsheet that looks like the following:

                Sales                                                                            $4,300,000

                 Cost of goods sold                                                         2,100,000

                            Gross profit                                                       2,200,000

                   Less net profit goal (10% of Gross profit)                       (220,000)

                   Less overhead (non-payroll and related taxes)              (800,000)    

            Calculating salary cap                                                       1,180,000

            Actual payroll costs                                                           1,540,000

            (Excess) payroll costs                                                        $(360,000)

A few notes while putting this form together:

  • When establishing your profit goal be sure to aim high. I assume your goal was to make money when you started your business.  So aim high. 

Notice I am subtracting profits as the very first item.  Your business profit plan is designed to make you the profit that your business deserves.  If you can’t figure out how to reach that profit than maybe the business isn’t a viable business as currently being operated.  (Pickup and read “Profit First” by Mike Michalowicz for a very good explanation of why you must take out your profits first.)

  • Cost of goods sold is all expense items needed to produce your product. Do not include payroll.
  • Payroll costs are all wages, salaries and outsourced contractors that you pay. Also add in all related costs such as payroll taxes, pension plan contributions, bonuses, health insurance, etc.
  • Overhead costs are all other business expenses other than costs of goods sold and payroll costs.

Once you have completed the form determine if you have excess payroll costs, like my example above, or if your payroll is under the calculated salary cap. 

If you are under the salary cap I recommend that you increase your profit goal dramatically.  In fact I would recommend that increase it to the point that you have created an excess payroll cost situation.  My experience is that businesses that are making a good profit already are perfectly situated to rapidly increase their profits by following my SMART Profit Maximizing System.

If your worksheet shows that you have excess payroll costs don’t panic. My example above is from a real client who I worked with.  Once I worked with them to implement my SMART Profit Maximizing System they had eliminated the payroll cap deficit and had increased their profit to $166,000 rather than a $220,000 loss.

This is the order that I use to increase the profits (all of these areas are covered in other articles):

  • First, I work with the client to decrease their overhead costs.
  • Second, I work with them to reduce payroll costs.
  • The third step is to increase your gross profit. This is mainly done by reducing your product costs and to improving your business cash conversion cycle.
  • Finally, we work to increase sales. We do this last because; at this point, we now can increase sales that add to the bottom profits.  Remember, if you increase sales first you may actually work harder and lower your profits.

Remember that massive profits are not an accident.  They are a result of creating and implementing a well thought out profit increasing plan.

So until next time—let’s make this our most profitable year ever.