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The 5-Step Profit Formula Explained with Adrian Ulsh

by | Adrian Ulsh, Business Coaching Fundamentals | 0 comments

In several of our previous posts, we’ve been discussing the 5-Step Profit Formula.

There are five critical steps that every small business owner MUST address in order to attract new clients and generate more revenue… leads, conversions, average sale value, number of transactions and profit margins.

We want to show you how to increase each of these 5 critical metrics for your coaching practice as well as your client’s business.

In our last post, we discussed average sale value… aka pricing. A “bundling” strategy works well here. Bundling is simply the process of grouping together certain products to create ‘packages’ which are then sold to clients. When you do this, you completely eliminate the biggest complaint small business owners have these days… competing on price.

Bundling removes price from the equation by creating an “apples to oranges” comparison. Bundling increases the perceived value so prospects buy more and businesses can charge more.

Today let’s discuss our fifth Profit Formula area…

Profit margins

Obviously, there are 2 major ways to increase your overall profitability… increase revenue or decrease your costs of doing business. Let’s discuss increasing your profitability first.

How about a really simple strategy – raise your prices. Most small businesses have NEVER raised their prices. That’s because they don’t know the facts when it comes to increasing their pricing. They’re scared to death that ANY price increase, no matter how small, will lead to a mass exodus of all their customers. But is that really true?

Let’s say you sell a widget for $100 and decide to increase that price 10% to $110. Will that small increase REALLY lead to a loss of customers? Honestly, I believe a few will leave, but they are most likely your biggest price shoppers that show NO loyalty or patronage to your business anyway.

They will beat you down price-wise every chance they get, and the moment you begin to make a decent profit, they will leave you in a heartbeat for the next business willing to accept a financial beat down.

But even though there will be some customer attrition… to what extent?

Let’s look at the numbers

The business selling this widget is now making an additional $10… ALL of which is pure profit. Right there, that’s a 33% profit increase. For this business to make $1000 in profit selling their widgets at $100 each, they would need to sell 33.3 widgets. But by increasing their price by 10%, they only need to sell 25 widgets.

That means that just to BREAK EVEN, this business would have to LOSE 25% of its customers over a measly 10% price increase… and that simply ISN’T going to happen!!!

Of course, we need to perform a thorough price analysis on your business and determine the most lucrative price increase for you, but this is definitely a strategy I strongly recommend to all of my small business clients to help them increase revenue.

There simply is no FASTER or EASIER way to generate additional revenue. But now let’s discuss option two…

Decrease your costs of doing business

One of the best ways to do this is to cut your labor costs. That’s a HUGE expense for any small business. Salary, benefits, social security taxes, unemployment insurance, worker’s comp., etc. really add up.

And yet, what can you do? You MUST have the labor you need to operate your business… especially as these other strategies we’ve looked at beginning to create exponential growth for your business.

This is where I like to use an “internship” strategy. Instead of hiring new personnel as you grow, consider offering an internship. Go to your local junior college, college or university and offer an internship for the semester or the year to those seeking degrees or experience in a similar field or area of expertise as your business.

For example, every business needs additional administrative help, so offer an internship to a student majoring in business administration. The schools LOVE it when a business offers internships since they act as a value-add to their educational offerings by providing their students with real-world experience.

The kids LOVE them for several reasons… it gets them OUT of the classroom. After all, 16 years is more than enough as far as the kids are concerned. The kids really do obtain real-world experience…  and that experience looks great on their resume.

It gives them a jump start on their peers when they graduate… especially since the company providing the internship often hires them upon graduating since they’re already trained and experienced in their processes.

The employer loves them for obvious reasons – they don’t have to pay these kids a salary because the kids receive college credit hours as their compensation.

Internships can save small business owners tens of thousands of dollars each year.

Until next time,
Adrian Ulsh

 About Adrian Ulsh

Adrian Ulsh is the CEO for Leader Publishing Worldwide, the largest online provider of coaching services worldwide. Adrian currently works with more than 500 coaches in 24 countries advising them on building 6 and 7 figure coaching practices.

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