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“Help! My business makes lots of sales, but I’m still just making ends meet at home.
I’m out of ideas.
Is there a way for me to make more money? Or has my business just ‘maxed out’ its earning potential?”
The big picture: I speak with a lot of business owners every week, and when I ask them their ‘goal’ around revenue and how much money they want to make, 90% of them say a million dollars.
They seem to think that a million dollars is a magical number where all their problems go away and that’ll afford them the lifestyle they have always dreamed of for themselves and their families.
And that’s when I’m forced to deliver a dose of reality to their dreams…let me explain.
The majority of businesses these days have a net profit margin of around 20%.
By the numbers: If they have a business generating a million dollars in revenue, (and only 4% of all businesses ever reach a million in revenue), their net profit is only $200,000. Now $200,000 is still good money, until the tax man cometh.
If you live on the east coast or west coast of the USA, you’ll pay around 50% of the $200,000 in federal, state, and local taxes…leaving you with just $100,000 for all your efforts.
- First, do this: STOP thinking in terms of revenue and START thinking in terms of profit.
- Repeat after me: Revenue feeds your ego…profit feeds your family.
When I get clients focused on profit instead of revenue it completely transforms their entire mindset, life, and business.
Suppose I could provide you with a framework that could double your current profits in just a matter of weeks.
And suppose I could show you how you could make the exact same profit as a million-dollar business…but with just 25% of that revenue?
The framework is called “Profit Acceleration.”
I’m going to lead you through an online profit acceleration simulator that you can use after you read this article that gives us the ability to plug in the gross revenue, gross profit, and net profit margins for any business, using ultra-conservative examples of just 6.6% and 2.63%, so we can view the profit impact those percentage increases would create.
Let me map out that million-dollar business we just discussed:
How it works: Let’s assume we’re advising a business that builds widgets (or sells a service called “widgets”). Let’s say this year they hit a million dollars in sales and they have a 50% gross profit margin. That leaves them with $500,000 in gross profit. But let’s say they also have overhead expenses so their net profit margin is 20%.
So for every million dollars they generate, they only actualize $200,000, and remember, that’s before taxes.
Now, what if I told you that you could easily generate that exact same net profit with only 25% of that gross revenue using the Profit Acceleration framework? Sound too good to be true? Not if you understand Profit Acceleration.
You’re probably familiar with this old adage: “if you take a penny and double it for 30 days, you’d be a millionaire.” Well, actually, you’d have $5.3M dollars.
That’s the incredible power of Profit Acceleration through compound growth.
The Secret: Stack Your Strategies
When I work with my clients, we start out by focusing on just 12 areas that can generate immediate increases in both revenue and profits…and without the business owner spending a cent on marketing or advertising.
By the numbers: Here’s what I mean…let’s plug in the numbers we talked about earlier:
$1,000,000, in revenue, 50% in gross profit, and 20% in net profit.
That means the net profit in this example is $200,000.
Now, let’s change the example company to one that has an annual revenue box of $250,000, which is just 25% of the one million dollar revenue example:
Let’s leave the gross and net profit margins the same.
So with a 20% net profit, we’re looking at $50,000 for this business that does $250,000 in annual revenue.
Remember that bold claim I made earlier about Profit Acceleration – how you could easily generate that exact same $200,000 net profit with only 25% of that $1 million dollar gross revenue?
Right now we’re still $150,000 short of our profit goal…and a staggering $750,000 from our original revenue goal.
Somehow we have to create an additional $150,000 in profit.
Put the Advil down. You won’t need it. That’s it. Screw the cap back on. Set it on the table. Back away. Slowly….slowly. Good. Victory! Feel free to high-five yourself. (I’m not the only one who does that, am I?)
Moving on…
Well, this is where most business owners begin to spend a fortune on marketing and advertising, which in most cases, doesn’t work and eats up what profit their business is already generating.
- Remember this: Marketing is often the LAST thing you should do to generate profit.
Marketing often fails to work, it’s often expensive, and it often carries enormous risk. Why? Because business owners turn to tactics like ads, social media, SEO, and PR before they have worked on strategies like a market-dominating position and compelling offer.
- Why it Matters: Without those two strategies defined first, digital tactics simply amplify your ‘sameness’ to the marketplace. What a terrible waste of (your) money. You’re actually paying to tell more people that you’re just like everyone else. Sad. Stop that. Bad dog!
- Key takeaway: Figure out why you are different than your competition. ‘Different’ is better than ‘best.’
Back to the Money, Honey
Here’s all we need to do to reach our $200,000 net profit goal…quickly and safely.
Watch what happens to the impact on your business when you stack 12 foundational strategies in the correct order with just a 6.6% impact in each of them.
Just a 6.6% impact creates a profit increase of $8,000 to $16,000 in EACH of the 12 areas.
Those small increases create a compound growth effect resulting in a new annual profit of $200,000. You’ve just created a $150,000 profit increase for a company that only has $250,000 in annual sales. That’s a 300% increase in profit, and this business owner, with 75% less revenue than the “million dollar business”, brings home the same amount of income.
That’s the power of Compound Growth Profit Acceleration.
For us, 6.6% is mere child’s play.
- Perspective: My manufacturing company tripled its revenue. That’s a 300% increase. So yeah, 6.6% is absolutely possible.
Consider this example, in our 12 impact areas, one of the strategies is to increase prices.
Now you’re probably thinking that there’s no way you can increase your prices. If you do, you’ll lose customers. But in reality, would you?
And if you would, what percent of your customer base would you estimate you’d lose if you increased your price by 6.6%?
That would be the equivalent of going to McDonald’s today for lunch to buy their Big Mac meal for $10, but when you got there, you saw the price is now $10.66. Most people would never notice that minor price increase. And for the few who would notice, would it really stop them from ordering that meal?
I seriously doubt it.
Is that example too small? Ok, let’s raise the stakes. Let’s say you own a gym and your monthly membership fee is $100. When you raise it by 6.6%, the new monthly fee becomes $106.66 (or round up to $107.)
Would the gym lose members over a $7 monthly increase? People get into a routine and develop a comfort level with their gym over time. People hate change. Do you think they would go through the process of investigating and visiting new gyms, and be open to having to “start over” with meeting people there and learning the rules, new machines, and the culture? All this because of a $7 per month increase?
I say, no way. It doesn’t jive with how humans are wired.
But let’s consider your estimate of the percentage of customers you think you would lose.
Do you think you would lose 5%? 10%?
- Wake-up Call: Would I shock you if I told you that by increasing your price by a measly 6.6% you could afford to lose a staggering 25% of your customers and you would still break even to where you were before the price increase?
Actually, that’s not true. You would still come out ahead because you would have 25% fewer customers to deal with and you could serve the remaining customers at a higher level of tender-loving care.
Back to reality: There is absolutely no way you would ever lose 25% of your customers on a 6.6% price increase.
Now consider this bombshell. Using profit acceleration, 6.6% was required to generate $200,000 in profit with just $250,000 in revenue…the same profit as most businesses generate with a million dollars of revenue. So, I’ve just shown you how obtainable a 300% profit increase is.
But perhaps for now, you would be thrilled to simply DOUBLE your current net profit.
Here’s how you can do that. In our example, just change that 6.6% in the impact box to 2.63%. Scroll down. You’ll see your net profit just doubled from $50k to $100k.
Any business with a gross profit margin of 50% and a net profit margin of 20% … regardless of revenue… will double their net profit if they increase all 12 areas by only 2.63%.
Try this using your numbers. Enter your gross revenue, your gross and net profit margins, move the green scroll bar until it reads 3%, check the summary box, and see if your profits have increased by at least 100%. That means your profits have doubled.
If they haven’t doubled, don’t worry, that just means your gross and net profit margins are different from the example we’ve been talking about. That’s okay, and normal. Different industries have different gross and net profit ranges.
Just move the green scroll bar to 4% and check the summary box again. Continue with this process until your profits double. Now you have a specific goal to aim for in the 12 areas.
Welcome to Profit Acceleration.
- The bottom line: Implement strategies before tactics.
- Stack 12 strategies to use the power of compound growth.
- Most strategies don’t cost money, so put your credit card away.
Result: Life-changing income in less than a year.
Welcome to your new “super power.”
Go Deeper:
- Here’s One Strategy to Lower Your Overhead
- How to Create Your Market-Dominating Position
- How to Create Your Compelling Offer
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