© 2011 bottom line up. why talk about profits? © 2011 bottom line up
TRANSCRIPT
© 2011 Bottom Line Up
Why Talk About Profits?
© 2011 Bottom Line Up
© 2011 Bottom Line Up
The Power of Small Changes
1 + 1 + 1 = 19
© 2011 Bottom Line Up
PERIOD 1 %
Revenue $ 5,000,000 100%
Direct Costs (COG) $ 2,500,000 50%
Overhead (SG&A) $ 2,000,000 40%
Net Income $ 500,000 10%
© 2011 Bottom Line Up
PERIOD 1 % Change Price+1%
CHANGE PRICE %
Revenue $ 5,000,000 100% $ 5,050,000 101.0%
COGS $ 2,500,000 50% $ 2,500,000 49.5%
SG&A $ 2,000,000 40% $ 2,000,000 40%
Net Income $ 500,000 10% $ 550,000 10.9%
Increase in Profit $ 50,000
% Increase in Profit 10%
© 2011 Bottom Line Up
PERIOD 1 % CHANGE COGS %
Revenue $ 5,000,000 100.0%Change COGS
-1% $ 5,000,000 100.0%
COGS $ 2,500,000 50% $ 2,475,000 49.5%
SG&A $ 2,000,000 40% $ 2,000,000 40%
Net Income $ 500,000 10% $ 525,000 10.5%
Increase in Profit $ 25,000
% Increase in Profit 5%
© 2011 Bottom Line Up
PERIOD 1 % CHANGE S,G&A %
Revenue $ 5,000,000 100.0% $ 5,000,000 100.0%
COGS $ 2,500,000 50%Change S,G&A
-1% $ 2,500,000 50%
SG&A $ 2,000,000 40% $ 1,980,000 39.6%
Net Income $ 500,000 10% $ 520,000 10.4%
Increase in Profit $ 20,000
% Increase in Profit 4%
© 2011 Bottom Line Up
PERIOD 1 % COMBINED IMPACT %
Revenue $ 5,000,000 100% +1% $ 5,050,000 101.0%
COGS $ 2,500,000 50% -1% $ 2,275,000 45.5%
SG&A $ 2,000,000 40% -1% $ 1,980,000 39.6%
Net Income $ 500,000 10% $ 595,000 12%
Increase in Profit $ 95,000
% Increase in Profit 19%
© 2011 Bottom Line Up
PricingPERIOD 1 % Change Price
+1%CHANGE PRICE %
Revenue $ 5,000,000 100% $ 5,050,000 101.0%
COGS $ 2,500,000 50% $ 2,500,000 49.5%
SG&A $ 2,000,000 40% $ 2,000,000 40%
Net Income $ 500,000 10% $ 550,000 10.9%
Increase in Profit $ 50,000
% Increase in Profit 10%
© 2011 Bottom Line Up
© 2011 Bottom Line Up
Start smalland monitor
© 2011 Bottom Line Up
How does 1% translate to the customer?
$1 per barstool$2 per hour
or
© 2011 Bottom Line Up
Price increased from 99 cents to $1.29
on one-half of their songs
= net of 15 cents per song
250 million songs per month X .15
= $37,500,000 per month or
1.25 million dollars per day
© 2011 Bottom Line Up
© 2011 Bottom Line Up
And Re-training
and Re-training and Re-training and Re-trainingand Re-training and Re-training and Re-training
Ask Rich and Mary
© 2011 Bottom Line Up
© 2011 Bottom Line Up
Ben Franklin was
Wrong…
PERIOD 1 % CHANGE COGS %
Revenue $ 5,000,000 100.0%Change COGS
-1% $ 5,000,000 100.0%
COGS $ 2,500,000 50% $ 2,475,000 49.5%
SG&A $ 2,000,000 40% $ 2,000,000 40%
Net Income $ 500,000 10% $ 525,000 10.5%
Increase in Profit $ 25,000
% Increase in Profit 5%
Direct Costs (COGS)
© 2011 Bottom Line Up
Overhead (SG&A)PERIOD 1 % CHANGE S,G&A %
Revenue $ 5,000,000 100.0% $ 5,000,000 100.0%
COGS $ 2,500,000 50%Change S,G&A
-1% $ 2,500,000 50%
SG&A $ 2,000,000 40% $ 1,980,000 39.6%
Net Income $ 500,000 10% $ 520,000 10.4%
Increase in Profit $ 20,000
% Increase in Profit 4%
© 2011 Bottom Line Up
Gross Margins:
Leading Indicator
ofProfit
Gross Profit = Take Home Pay
© 2011 Bottom Line Up
Current Decisions
vs.
Past Circumstances
© 2011 Bottom Line Up
© 2011 Bottom Line Up
PATH DEPENDENCE
© 2009 Bottom Line Up
Time:
Einstein discovers that time is actually money
© 2011 Bottom Line Up
1. Mandate vs. manage – Get buy-in and involvement
2. Highly variable expenses like marketing, training, support, etc. – Look at long range effects
3. Across the board cuts – Be strategic!
3 Common Mistakes
© 2011 Bottom Line Up
Make Expense Management A Profit
Center
Be Strategic:
Waste is Expensive
With 10% Profit -
Unnecessary Expenses of
$1000
Requires Additional Sales of
$10,000
© 2009 Bottom Line Up
Vendor discounts and agreements
Compliance audits - vendors and employees
Supply management
‘Shrinkage and theft controls’
© 2011 Bottom Line Up
One neckto
choke
© 2011 Bottom Line Up
© 2011 Bottom Line Up
Fixed Isn’t Always Fixed
Overtime
Commissions
Expense Accounts
© 2011 Bottom Line Up
© 2011 Bottom Line Up
Eliminate Empty Calorie Spending
Re-bid Calendar
© 2011 Bottom Line Up
$20,000 per weekPrice variance +/-25%
Savings of up to $5000 per week
© 2011 Bottom Line Up
The eyes can see anything but themselves
When you’ve gone as far as you can
internally – bring in outside experts
© 2011 Bottom Line Up
What can I do?
What can my dept. do?
What can my company do?
What “dumb things” should we stop doing?
Ask Rich and Mary
© 2011 Bottom Line Up
Lucky 7 Challenge
$7 million
open orders$7 millionrevenue
$700,000 Bottom Line
7 7 7
How do we effectively manage costs and
create ongoing profitability?
The Four Hands Challenge
Better Faster Cheaper
Global ResourcesGreat People & Attitudes
Training
Up 1000% - $55,000
Salaries
Up 40% - $2.05 to $2.9M
Benefits
Up 69% - $141,000 to $246,000
Human ResourcesGreat People & Attitudes
Prior Year
India 9 China 8Europe 1USA 54
Total 72
Current Year
9
10 1
58
78
Advertising, promotions, mailings, PR
Prior yr -$168,000 Current year -$277,000 up 65%
Trade Shows – $ 1,000,000
Travel & entertainment – Crate / NYC
Materials (printing, Web sites etc.)
Market Development
Offices in India, China, and Brussels
Travel to markets world wide
Potential offices in Vietnam and Indonesia
Samples shipped to clients
Identifying factories
Quality control
Samples at shows including air freight
Introducing New Product/QA
Controllable Costs – Great Examples
Freight/Shipping
Courier Fees
Vendor Deposits
Interest and Bank Fees,$329,000 down to $172,500
Rejecting ½ of a Container
Processes and Systems Control Costs
THEY NAILED IT!
Great Culturesare Forged not Forced
What Will You Be Taking Away?
© 2011 Bottom Line Up
© 2011 Bottom Line Up