The Competitive Edge Newsletter

 Edition 42

Business Is A Numbers Game

Few business owners analyse their net profitability from each product or service they sell. Working on the financials can be time consuming and, for many, tedious.

                                  But to maintain success in your business you need to know which items are bringing

                                                  in a good profit and whether any are actually costing you money.

When people have done the exercise below they have frequently been amazed where the profits are coming from. And, in some cases, not coming from! Inevitably, within their stable of products and services, they see some are much more profitable than others. This revelation usually results in some instant changes to adjust the imbalance. It also impacts future marketing strategies and the business owner's focus on moving forward.

Most of us know our net yearly profit, but how can we calculate our net profit from each of our products or services?

First up, we need to fairly proportion our production and overhead costs to each product or service. How to do this varies (depending upon the nature of the business) however, we have outlined below a fairly simple, roughly accurate, method which best suits service and manufacturing businesses. You will need to go through this process for each product or service.

1. Calculate the Gross Profit - From your sales price (excluding GST) subtract both the Cost of Goods plus a charge for the time taken to produce and/or deliver. This will require an estimate of the number of hours it takes to produce or deliver multiplied by an average hourly labour rate.

2. Deduct the Business Overheads - Divide Total Overheads by the Total Hours. This will produce a figure that represents the overhead cost per hour. Multiply this by the number of hours required to produce or deliver the service (see step 1) and then deducted from the result of step 1.

                                             The result will be an estimate of your net profit derived from that product or service.

You may need to use a slightly different approach to come up with this calculation, depending on the type of your business, so seek expert advise on how best to go about it. (We can help you with this)

The exercise above can yield some surprising results as this business owner discovered...

After 'doing the numbers' he reduced his turnover from $1.3 million to $1 million while turning the business around from losing $100,000 to making a profit of $100,000. He did this purely by eliminating non-profitable product lines.

Business is a numbers game. Do the numbers to find out which products or services are driving your business profits.

Establishing Rapport

Whether you are speaking with a 'hot' prospect, someone in your team, or a family member, to communicate well, you need to establish a level of rapport with the other person.

So listen to what they are saying, not just the message they want to get across, but the actual words they choose.

Anthony Robbins (Unlimited Power) says: "The biggest block to rapport is thinking that because you see the world one way, everyone else does too. Excellent communicators rarely make that mistake. They know they have to change their language, their tonality, and their gestures until they discover an approach that is successful in achieving their outcome."

There are three predominant speaking styles using three primary senses: visual, auditory and kinesthetic (touch).

A visual person has images of their experiences, auditory people talk about their experiences, and kinaesthetic thinkers have feelings about their experiences. And the words they use reflect this.

For example:

Visual                                                                                      

My vision is to ...

It appears to me...

I agree with your perspective...

Can you see the picture?

I'll show you...

Let me illustrate...

Auditory

Listen to this...

I hear what you are saying...

Can you amplify that point?

It sounds good to me...

Something tells me...

Suddenly it all clicked...

Kinesthetic

How do you feel about it?

Concrete evidence...

Do you grasp this idea?

I'll handle it...

Let's keep in touch...

Absorb the cost...

Let's say you are in conversation and know what the other person is saying. Depending on their style, you could say, for example...

• Visual: "That's clear to me" or "I see your point."
• Auditory: "I'm in tune with you" or "That rings a bell."
• Kinesthetic: "I can grasp your meaning" or "That strikes me as being correct."

So practice listening to the words people use, mirror their style, and see if rapport comes more easily. With rapport comes trust and you are much more likely to do business with someone who trusts you.

_____________________________________________________Quote of the Month______________________________

 "A small trouble is like a pebble. Hold it too close to your eye and it fills the whole world and puts everything out of focus. Hold it at a proper distance and it can be examined and properly classified. Throw it at your feet and it can be seen in its true setting, just one more tiny bump on the pathway of life." - Celia Luce

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