Using the 10 Percent Profit Formula to Thrive During Tough Economic Times

Home » Blog » Using the 10 Percent Profit Formula to Thrive During Tough Economic Times

Percent-1176982_1280Business owners rightfully see their businesses being affected negatively by increases in federal and state taxes, tougher bank credit rules, increased audits by the IRS and state, customers who are more cautious with their money, and ObamaCare taxes and rules.

What most business owners do when they get nervous is hunker down and play defense.  They cut costs, cut employees, cut advertising, and do more of the work themselves.  But those may not be the correct things to do when the economy is tough.

Now when times are good and profits are easy, many business owners become a little lackadaisical about improving business.  When the economic landscape is tough, like it is now, that is no longer an option.  In order to survive (and even thrive) in a tough economy, the business owner must become a profit coach for his business.

Most business owners do not understand that there is a formula and a process to improving profits.  I express it as a formula as follows:

A 10 percent increase in qualified leads…

A 10 percent increase in the conversion of these leads into paying customers

+  A 10 percent increase in annual sales amount per customer

+  A 10 percent increase in referrals from current customers

+  A 10 percent increase in customer retention

=  A 10 percent increase in sales

+  A 10 percent increase in efficiency due to improvements in systems and training

–  A 10 percent decrease in product costs, overhead expenses, and income taxes

=  A massive increase in profit!

A massive increase in profits resulting in increased cash flow and owner compensation is not an accident!  It is the result of systematic, daily improvement in each area of the profit formula.

But most business owners are so busy working in their businesses that they never seem to get around to working on improving them!  The business owner must commit four hours a week to working on improving their business by following the profit formula.