Maximize Profits Format 2 R4

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Sales, Profitability, Coaching, Sales Training, Business Coaching, Price Discounting, Holding Your Price

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  • 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
  • Maximize Profits Format 2 R4

    1. 1. Maximizing Profits<br />Developed by Bill VanSickle<br />and Robin Bryer<br />Sales Performance Associates<br />SPA<br />SPA<br />
    2. 2. The Location<br />
    3. 3. 3<br />Product Cost<br />Overhead<br />Sales Volume<br />Sales Price<br />
    4. 4. 4<br />Product Cost<br />Overhead<br />Sales Volume<br />Sales Price<br />If we decrease or increase each of these things by 10%, which one will have the Greatest Impact as a means of Increasing Profits? <br />
    5. 5. 5<br />Base Scenario<br />Sales $1,000,000<br /> Product Cost 350,000<br /> Labor 150,000<br /> Commission 80,000<br />Gross Profit $ 420,000<br /> Overhead 360,000<br />Net Profit $ 60,000<br />2.0 Mark-up on Product & Labor<br />8% Commission<br />$360,000 Overhead<br />
    6. 6. 6<br />Base Scenario<br />Sales $1,000,000<br /> Product Cost 350,000<br /> Labor 150,000<br /> Commission 80,000<br />Gross Profit $ 420,000<br /> Overhead 360,000<br />Net Profit $ 60,000<br />2.0 Mark-up on Product & Labor<br />8% Commission<br />$360,000 Overhead<br />Decrease Product Cost 10%<br />Decrease Overhead 10%<br />Increase Sales Volume 10%<br />Increase Sales Price 10%<br />Which factor will have the Greatest Impact on Increasing Profits?<br />
    7. 7. Base Scenario<br />Decrease<br />Overhead<br />Decrease<br />Cost<br />Increase<br />Volume<br />Increase<br />Price<br />Decreasing Product Cost by 10%<br />Sales $1,000,000 <br />Product Costs350,000<br /> Labor Costs 150,000<br /> Commissions 80,000<br />1,000,000<br />315,000<br />150,000 <br />80,000 <br />Gross Profit $ 420,000 <br />Overhead 360,000<br />455,000<br />360,000<br />Net Profit $ 60,000<br />95,000<br />
    8. 8. Base Scenario<br />Decrease<br />Overhead<br />Increase<br />Volume<br />Increase<br />Price<br />Decrease<br />Cost<br />Decreasing Overhead by 10%<br />Sales $1,000,000 <br />Product Costs350,000<br /> Labor Costs 150,000<br /> Commissions 80,000<br />1,000,000<br />1,000,000<br />315,000<br />150,000 <br />80,000 <br />350,000<br />150,000 <br />80,000 <br />Gross Profit $ 420,000 <br />Overhead 360,000<br />420,000<br />455,000<br />324,000<br />360,000<br />Net Profit $ 60,000<br />96,000<br />95,000<br />
    9. 9. Base Scenario<br />Decrease<br />Overhead<br />Increase<br />Volume<br />Increase<br />Price<br />Decrease<br />Cost<br />Increasing Sales Volume by 10%<br />Sales $1,000,000 <br />Product Costs350,000<br /> Labor Costs 150,000<br /> Commissions 80,000<br />1,100,000<br />1,000,000<br />1,000,000<br />315,000<br />150,000 <br />80,000 <br />385,000<br />350,000<br />150,000 <br />80,000 <br /> 165,000 <br /> 88,000<br />Gross Profit $ 420,000 <br />Overhead 360,000<br />462,000<br />420,000<br />455,000<br />360,000<br />324,000<br />360,000<br />Net Profit $ 60,000<br />102,000<br />96,000<br />95,000<br />
    10. 10. Base Scenario<br />Decrease<br />Overhead<br />Increase<br />Volume<br />Increase<br />Price<br />Decrease<br />Cost<br />Increasing Sales Price by 10%<br />Sales $1,000,000 <br />Product Costs350,000<br /> Labor Costs 150,000<br /> Commissions 80,000<br />1,100,000<br />1,100,000<br />1,000,000<br />1,000,000<br />315,000<br />150,000 <br />80,000 <br />350,000<br />385,000<br />350,000<br />150,000<br /> 88,000 <br />150,000 <br />80,000 <br /> 165,000 <br /> 88,000<br />Gross Profit $ 420,000 <br />Overhead 360,000<br />512,000<br />462,000<br />420,000<br />455,000<br />360,000<br />360,000<br />324,000<br />360,000<br />Net Profit $ 60,000<br />152,000<br />102,000<br />96,000<br />95,000<br />
    11. 11. Profits and Pizza<br />11<br />Base Scenario<br />Sales $1,000,000<br /> Product Cost 350,000<br /> Labor 150,000<br /> Commission 80,000<br />Gross Profit $ 420,000<br /> Overhear 360,000<br />Net Profit $ 60,000<br />2.0 Mark-up on Product & Labor<br />8% Commission<br />$360,000 Overhead<br />
    12. 12. Base Scenario<br />Decrease<br />Overhead<br />Increase<br />Volume<br />Increase<br />Price<br />Decrease<br />Cost<br />Increasing Sales Price by 10%<br />Sales $1,000,000 <br />Product Costs350,000<br /> Labor Costs 150,000<br /> Commissions 80,000<br />1,100,000<br />1,100,000<br />1,000,000<br />1,000,000<br />315,000<br />150,000 <br />80,000 <br />350,000<br />385,000<br />350,000<br />150,000<br /> 88,000 <br />150,000 <br />80,000 <br /> 165,000 <br /> 88,000<br />Gross Profit $ 420,000 <br />Overhead 360,000<br />512,000<br />462,000<br />420,000<br />455,000<br />360,000<br />360,000<br />324,000<br />360,000<br />Net Profit $ 60,000<br />152,000<br />102,000<br />96,000<br />95,000<br />
    13. 13. Base Scenario<br />Decrease<br />Overhead<br />Increase<br />Volume<br />Increase<br />Price<br />Decrease<br />Cost<br />Increasing Sales Price by 10%<br />Sales $1,000,000 <br />Product Costs350,000<br /> Labor Costs 150,000<br /> Commissions 80,000<br />1,100,000<br />1,100,000<br />1,000,000<br />1,000,000<br />315,000<br />150,000 <br />80,000 <br />385,000<br />350,000<br />350,000<br />150,000<br />110,000* <br />150,000 <br />80,000 <br /> 165,000 <br /> 88,000<br />Gross Profit $ 420,000 <br />Overhead 360,000<br />462,000<br />420,000<br />455,000<br />490,000<br />360,000<br />360,000<br />324,000<br />360,000<br />Net Profit $ 60,000<br />102,000<br />130,000<br />96,000<br />95,000<br />* Increase Commissions to 10%<br />
    14. 14. Base Scenario<br />Decrease<br />Overhead<br />Increase<br />Volume<br />Increase<br />Price<br />Decrease<br />Cost<br />Increasing Sales Price by 5%<br />Sales $1,000,000 <br />Product Costs350,000<br /> Labor Costs 150,000<br /> Commissions 80,000<br />1,050,000<br />1,100,000<br />1,000,000<br />1,000,000<br />315,000<br />150,000 <br />80,000 <br />350,000<br />385,000<br />350,000<br />150,000<br />84,000 <br />150,000 <br />80,000 <br /> 165,000 <br /> 88,000<br />466,000<br />Gross Profit $ 420,000 <br />Overhead 360,000<br />462,000<br />420,000<br />455,000<br />360,000<br />360,000<br />324,000<br />360,000<br />Net Profit $ 60,000<br />106,000<br />102,000<br />96,000<br />95,000<br />
    15. 15. All I need to get this deal is a 5% discount!<br />What’s the Real Impact of a 5% Discount<br />How can I raise my prices when . . .<br />
    16. 16. Base Scenario<br />Decrease Price 5%<br />5% discount equals a 76.7% reduction in Net Profits<br />The Real Impact of Discounting<br />Sales $ 1,000,000<br />Product Costs350,000<br /> Labor Costs 150,000<br /> Commissions 80,000 <br />950,000<br />350,000<br />150,000 <br />76,000 <br />Gross Profit $ 420,000 <br />Overhead 360,000<br />374,000<br />360,000<br />Net Profit $ 60,000<br />$14,000<br />
    17. 17. Base Scenario<br />Decrease Price 5%<br />5% discount equals a 76.7% reduction in Net Profits<br />The Real Impact of Discounting<br />Sales $ 1,000,000<br />Product Costs350,000<br /> Labor Costs 150,000<br /> Commissions 80,000 <br />950,000<br />350,000<br />150,000 <br />76,000 <br />Gross Profit $ 420,000 <br />Overhead 360,000<br />374,000<br />360,000<br />Net Profit $ 60,000<br />$14,000<br />Even selling at the base price you make $46,000 more than you would by discounting 5%<br />
    18. 18. Base Scenario<br />Increase<br />Price 5%<br />Discount Price 5%<br />Comparison: Discounting vs. Increasing Price<br />Increase<br /> Price 10%*<br />Sales $ 1,000,000<br />Product Costs350,000<br /> Labor Costs 150,000<br /> Commissions 80,000<br />1,050,000<br />1,100,000<br />950,000<br />350,000<br />350,000<br />150,000 <br />76,000 <br />350,000 <br />150,000<br />150,000 <br />110,000* <br />84,000<br />Gross Profit$ 420,000<br />Overhead 360,000<br />490,000 <br />466,000<br />374,000<br />360,000<br />360,000<br />360,000<br />Net Profit $ 60,000<br />106,000<br />130,000<br />14,000<br />* 10% Price Increase with 10% Commission<br />
    19. 19. Let’s work together to increase your profit margins and stop discounting<br />Contact us today<br />Sales Performance Associates<br />SPA<br />SPA<br />Dallas:Scott Espy sespy@salesperformanceassociates.com; 214-641-9336<br />Denver: Bill VanSickle bvs@salesperformanceassociates.com; 800-873-SELL <br />www.SalesPerformanceAssociates.com<br />

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