The Only Business Formula For Success You'll Ever Need

Barry Moltz

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Profit = Revenue – Expense
Got it? Okay, not so simple is it? We get so caught up in our businesses on a daily basis that we don’t keep track of our revenue and expenses as well as we should. We don’t review our financial statements, project our revenues and cash flows as often as we can. I lost a million dollars in the sale of my last business 10 years ago since I do understand every item on my balance sheet.
In this recession, we need to match every expense with a revenue source to increase our profitability. Does every expense on your Profit and Loss Statement have a purpose? Look  especially at these categories:
1. Cost of Goods Sold (or Cost of Sales): Is this the lowest price you can get to produce the quantity you need at the quality your customers will accept? Can we reduce quality and still keep or grow our customers? The reality is that during tough times, we need to examine if “good enough” quality products will satisfy the customer. Are we providing excess quality the customer does not or won’t pay for?
2. Rent and Other Utilities: Do you really need an office space or can your company go virtual? There are  many tools that are available that can enable communication among your team. If you are a retail store, you need to keep your space, but if clients rarely visit, is there a way out of paying rent? Rent usually accounts for 10% of the revenue of the company in major urban cities.How would you like to add 10% to your bottom line?
3. Marketing and Sales: How do you reach clients? Is that method providing a return you can track? What do you use specifically do to acquire suspects who may be interested? What is the cost? Forcing yourself to identify the return you get from all your marketing and sales efforts will ensure you are doing the right things to reach your customers.
4. People: Who at your company brings in the revenue? Who supports the revenue? Fire everyone else. If you keep other people to support the company’s "productivity," test what that productivity actually is when they go on vacation. Furthermore, if you keep people around that make you feel good, you are taking money out of your pocket and putting it into theirs. Make sure it is worth it.
5. Phones and the Internet: When was the last time you checked your plan? Are you going over or under your minutes? Are you on the wrong plan? Use Skype more!
6. Health Insurance: Look at HMO options for your employees. You are not to bear the cost the annual 20 percent increase every year. This is a burden you need to share with your employees.
7. Other Liability Insurance: Is the cost worth the risk you bear? Will the worst really happen? Consider cutting some of your insurance especially if you are a small company and there is not a lot someone suing you could take.
8. Office Supplies: Tell everyone its BYOS (Bring Your Own Supplies)! Forget the pads, limit the paper, and kill less trees. Your office will consume as many office products as you feed it. Set a limit.
9. Travel: Plan ahead for flights. Use Frequent Flyer miles. Use free conference calls and skype and only do face to face meetings when necessary. Combine trips so you can go to multiple cities at one time.
10. All Other Expense Items: If you zeroed out the other expenses, what would really happened to your business? Do without and see what happens. You will be surprised what you can do without.
What formula's do you use in your business? What are the specific items you are most tracking now?http://www.allbusiness.com/company-activities-management/financial-performance/15220208-1.html

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