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© 2011 Bottom Line Up
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Why Talk About Profits? © 2011 Bottom Line Up
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The Power of Small Changes 1 + 1 + 1 = 19 © 2011 Bottom Line Up
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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
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Change Price +1% 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
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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
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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
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Revenue $ 5,000,000100% +1% $ 5,050,000 101.0% COGS $ 2,500,00050% -1% $ 2,275,000 45.5% SG&A $ 2,000,00040% -1% $ 1,980,000 39.6% Net Income $ 500,00010% $ 595,000 12% Increase in Profit $ 95,000 % Increase in Profit 19% © 2011 Bottom Line Up
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Change Price +1% 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
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Start small and monitor © 2011 Bottom Line Up
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How does 1% translate to the customer? $1 per barstool $2 per hour or © 2011 Bottom Line Up
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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
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And Re-training and Re-training and Re-training
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Ask Rich and Mary © 2011 Bottom Line Up
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Ben Franklin was Wrong…
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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
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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
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Gross Margins: Leading Indicator of Profit
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Gross Profit = Take Home Pay © 2011 Bottom Line Up
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Current Decisions vs. Past Circumstances © 2011 Bottom Line Up
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PATH DEPENDENCE
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Time: Einstein discovers that time is actually money © 2009 Bottom Line Up
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© 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
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© 2011 Bottom Line Up Make Expense Management A Profit Center Be Strategic:
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Waste is Expensive With 10% Profit - Unnecessary Expenses of $1000 Requires Additional Sales of $10,000 © 2009 Bottom Line Up
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Vendor discounts and agreements Compliance audits - vendors and employees Supply management ‘Shrinkage and theft controls’ © 2011 Bottom Line Up
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One neck to choke © 2011 Bottom Line Up
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Fixed Isn’t Always Fixed
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Overtime Commissions Expense Accounts © 2011 Bottom Line Up
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Eliminate Empty Calorie Spending
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Re-bid Calendar © 2011 Bottom Line Up
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$20,000 per week Price variance +/-25% Savings of up to $5000 per week © 2011 Bottom Line Up
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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
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What can I do? What can my dept. do? What can my company do? What “dumb things” should we stop doing?
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Ask Rich and Mary © 2011 Bottom Line Up
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Lucky 7 Challenge
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$7 million open orders $7 million revenue $700,000 Bottom Line 7 7 7
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How do we effectively manage costs and create ongoing profitability? The Four Hands Challenge The Four Hands Challenge BetterFasterCheaper
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Global Resources Great People & Attitudes Training Up 1000% - $55,000 Salaries Up 40% - $2.05 to $2.9M Benefits Up 69% - $141,000 to $246,000
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Human Resources Great People & Attitudes Prior Year India9 China8 Europe1 USA54 Total 72 Current Year 9 10 1 58 78
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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
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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
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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
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THEY NAILED IT!
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Great Cultures are Forged not Forced
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What Will You Be Taking Away? © 2011 Bottom Line Up
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