Recommended
More Related Content
Similar to Maximize Profits Format 2 R4
Similar to Maximize Profits Format 2 R4 (20)
Recently uploaded
Recently uploaded (20)
Maximize Profits Format 2 R4
- 1. Maximizing Profits Developed by Bill VanSickle and Robin Bryer Sales Performance Associates SPA SPA
- 2. The Location
- 3. 3 Product Cost Overhead Sales Volume Sales Price
- 4. 4 Product Cost Overhead Sales Volume Sales Price If we decrease or increase each of these things by 10%, which one will have the Greatest Impact as a means of Increasing Profits?
- 5. 5 Base Scenario Sales $1,000,000 Product Cost 350,000 Labor 150,000 Commission 80,000 Gross Profit $ 420,000 Overhead 360,000 Net Profit $ 60,000 2.0 Mark-up on Product & Labor 8% Commission $360,000 Overhead
- 6. 6 Base Scenario Sales $1,000,000 Product Cost 350,000 Labor 150,000 Commission 80,000 Gross Profit $ 420,000 Overhead 360,000 Net Profit $ 60,000 2.0 Mark-up on Product & Labor 8% Commission $360,000 Overhead Decrease Product Cost 10% Decrease Overhead 10% Increase Sales Volume 10% Increase Sales Price 10% Which factor will have the Greatest Impact on Increasing Profits?
- 7. Base Scenario Decrease Overhead Decrease Cost Increase Volume Increase Price Decreasing Product Cost by 10% Sales $1,000,000 Product Costs350,000 Labor Costs 150,000 Commissions 80,000 1,000,000 315,000 150,000 80,000 Gross Profit $ 420,000 Overhead 360,000 455,000 360,000 Net Profit $ 60,000 95,000
- 8. Base Scenario Decrease Overhead Increase Volume Increase Price Decrease Cost Decreasing Overhead by 10% Sales $1,000,000 Product Costs350,000 Labor Costs 150,000 Commissions 80,000 1,000,000 1,000,000 315,000 150,000 80,000 350,000 150,000 80,000 Gross Profit $ 420,000 Overhead 360,000 420,000 455,000 324,000 360,000 Net Profit $ 60,000 96,000 95,000
- 9. Base Scenario Decrease Overhead Increase Volume Increase Price Decrease Cost Increasing Sales Volume by 10% Sales $1,000,000 Product Costs350,000 Labor Costs 150,000 Commissions 80,000 1,100,000 1,000,000 1,000,000 315,000 150,000 80,000 385,000 350,000 150,000 80,000 165,000 88,000 Gross Profit $ 420,000 Overhead 360,000 462,000 420,000 455,000 360,000 324,000 360,000 Net Profit $ 60,000 102,000 96,000 95,000
- 10. Base Scenario Decrease Overhead Increase Volume Increase Price Decrease Cost Increasing Sales Price by 10% Sales $1,000,000 Product Costs350,000 Labor Costs 150,000 Commissions 80,000 1,100,000 1,100,000 1,000,000 1,000,000 315,000 150,000 80,000 350,000 385,000 350,000 150,000 88,000 150,000 80,000 165,000 88,000 Gross Profit $ 420,000 Overhead 360,000 512,000 462,000 420,000 455,000 360,000 360,000 324,000 360,000 Net Profit $ 60,000 152,000 102,000 96,000 95,000
- 11. Profits and Pizza 11 Base Scenario Sales $1,000,000 Product Cost 350,000 Labor 150,000 Commission 80,000 Gross Profit $ 420,000 Overhear 360,000 Net Profit $ 60,000 2.0 Mark-up on Product & Labor 8% Commission $360,000 Overhead
- 12. Base Scenario Decrease Overhead Increase Volume Increase Price Decrease Cost Increasing Sales Price by 10% Sales $1,000,000 Product Costs350,000 Labor Costs 150,000 Commissions 80,000 1,100,000 1,100,000 1,000,000 1,000,000 315,000 150,000 80,000 350,000 385,000 350,000 150,000 88,000 150,000 80,000 165,000 88,000 Gross Profit $ 420,000 Overhead 360,000 512,000 462,000 420,000 455,000 360,000 360,000 324,000 360,000 Net Profit $ 60,000 152,000 102,000 96,000 95,000
- 13. Base Scenario Decrease Overhead Increase Volume Increase Price Decrease Cost Increasing Sales Price by 10% Sales $1,000,000 Product Costs350,000 Labor Costs 150,000 Commissions 80,000 1,100,000 1,100,000 1,000,000 1,000,000 315,000 150,000 80,000 385,000 350,000 350,000 150,000 110,000* 150,000 80,000 165,000 88,000 Gross Profit $ 420,000 Overhead 360,000 462,000 420,000 455,000 490,000 360,000 360,000 324,000 360,000 Net Profit $ 60,000 102,000 130,000 96,000 95,000 * Increase Commissions to 10%
- 14. Base Scenario Decrease Overhead Increase Volume Increase Price Decrease Cost Increasing Sales Price by 5% Sales $1,000,000 Product Costs350,000 Labor Costs 150,000 Commissions 80,000 1,050,000 1,100,000 1,000,000 1,000,000 315,000 150,000 80,000 350,000 385,000 350,000 150,000 84,000 150,000 80,000 165,000 88,000 466,000 Gross Profit $ 420,000 Overhead 360,000 462,000 420,000 455,000 360,000 360,000 324,000 360,000 Net Profit $ 60,000 106,000 102,000 96,000 95,000
- 15. All I need to get this deal is a 5% discount! What’s the Real Impact of a 5% Discount How can I raise my prices when . . .
- 16. Base Scenario Decrease Price 5% 5% discount equals a 76.7% reduction in Net Profits The Real Impact of Discounting Sales $ 1,000,000 Product Costs350,000 Labor Costs 150,000 Commissions 80,000 950,000 350,000 150,000 76,000 Gross Profit $ 420,000 Overhead 360,000 374,000 360,000 Net Profit $ 60,000 $14,000
- 17. Base Scenario Decrease Price 5% 5% discount equals a 76.7% reduction in Net Profits The Real Impact of Discounting Sales $ 1,000,000 Product Costs350,000 Labor Costs 150,000 Commissions 80,000 950,000 350,000 150,000 76,000 Gross Profit $ 420,000 Overhead 360,000 374,000 360,000 Net Profit $ 60,000 $14,000 Even selling at the base price you make $46,000 more than you would by discounting 5%
- 18. Base Scenario Increase Price 5% Discount Price 5% Comparison: Discounting vs. Increasing Price Increase Price 10%* Sales $ 1,000,000 Product Costs350,000 Labor Costs 150,000 Commissions 80,000 1,050,000 1,100,000 950,000 350,000 350,000 150,000 76,000 350,000 150,000 150,000 110,000* 84,000 Gross Profit$ 420,000 Overhead 360,000 490,000 466,000 374,000 360,000 360,000 360,000 Net Profit $ 60,000 106,000 130,000 14,000 * 10% Price Increase with 10% Commission
- 19. Let’s work together to increase your profit margins and stop discounting Contact us today Sales Performance Associates SPA SPA Dallas:Scott Espy sespy@salesperformanceassociates.com; 214-641-9336 Denver: Bill VanSickle bvs@salesperformanceassociates.com; 800-873-SELL www.SalesPerformanceAssociates.com
Editor's Notes
- And he wrote the following:OverheadProduct CostSales VolumeSales Price
- Then he preceded to ask meIf we decrease or increase each of these things by 10%, which one will have the Greatest Impact as a means of Increasing Profits? Well give me a scenario.One thing I omited telling you about Robin is that he has a strong financial background and is a non-practicing CPASo he grabbed a napkin and wrote the following scenario
- I took an educated guess – which I’ll tell you later in this presentation.Why don’t you select a factor and as I continue the presentation you’ll see if your answer is correct.
- Then we ran the numbers on Decreasing Product Cost – and as you can see it didn’t impact profits any more than Overhead.
- Then we went to Increasing Sales Volume. As you can see, when we increased sales volume we also had to increase Product and Labor cost and commissions.Unfortunately when times get tough companies often only look at ways of cutting costs and overhead. So might be asking yourself, at these time, should I continue to invest in my sales resources? And clearly this model shows that increasing sales volume will yield a higher return on investment.Finally, we ran the numbers on Increasing Price.And I’ll tell you now that this is the one I picked.
- However, when I saw how much Increasing Price impacted profits, quite frankly I was blown away. I had no idea that a 10% increase in price – going from a million to a million 1 hundred thousand increased profits by over 250%As you can see the other factors aren’t even close to Increasing Price. So did you select the correct factor? – and if you did were you surprised at the impact Increasing Price had on profits?I’m somewhat curious - since it had such a dramatic impact I wanted to see what affect paying a larger commission had on profits
- However, when I saw how much Increasing Price impacted profits, quite frankly I was blown away. I had no idea that a 10% increase in price – going from a million to a million 1 hundred thousand increased profits by over 250%As you can see the other factors aren’t even close to Increasing Price. So did you select the correct factor? – and if you did were you surprised at the impact Increasing Price had on profits?I’m somewhat curious - since it had such a dramatic impact I wanted to see what affect paying a larger commission had on profits
- So I ran the numbers with 10% versus 8% commission.And as you can see even with a larger commission profits still more than doubled.Next I wanted to see what a 5% increase in price had on profits.
- Even a 5% increase in price was greater than increasing or decreasing the other factors by 10%
- I think it was the second time I gave this presentation – in the Q & A session, someone stood up and said . . . I wanted to see what the real impact of discounting. I chose 5% - that doesn’t seem like a lot.
- However in running the figures with this scenario a 5% discount actually equaled almost a 77% reduction in Net Profits
- Here the comparison between selling at your base price, discounting 5% and increasing your price 10% and 5% By the way if you plug your own numbers into here, I pretty well guarantee you you’ll see similar resultsWhat’s this all mean