The Math of Improving Our Profitability: Part 2
By Donald Cooper
Note from Otto Papasadero, executive director: This article is the second part of an article that was begun in the last NARDA E-Newsletter. It is somewhat longer than most because it turns out to be an important exercise that should be undertaken by all NARDA members. This article contains exercises No. 2 and No. 3 of the detailed exercise. You will need sufficient time to really concentrate on completing the exercises. It is not a task that can be done very quickly, but the benefits should produce big dividends. Your next task is to print this out and distribute it to your leadership team following a meeting to discuss it.
Understanding the math of profitability can have a profound impact on your business and your life. Many business owners and managers believe they must make big improvements in their businesses to make any real difference on their bottom lines. The opposite is true. Small improvements in pricing, sales or operating efficiency can make a huge difference in your profitability.
For 20 years, I’ve been asking clients three simple questions about improving profitability, and no one has yet had the answers. Here are the three key questions about the math of profitability in any business. The answers will likely amaze you.
Question No. 1: If we were so good at what we do that we could raise prices by just 5 percent and nobody noticed or cared, what would be the impact on our bottom line? The answer is that our bottom line would probably grow by somewhere between 70 percent and 100 percent.
Question No. 2: If we were so good at what we do that we could increase sales by just 5 percent without spending a fortune on advertising or cutting our prices, what would be the impact on our bottom line? The answer is that our bottom line would probably grow by somewhere between 25 percent and 45 percent.
Question No. 3: If we could improve operating efficiency and reduce expenses by just 5 percent, what would be the impact on our bottom line? The answer is that our bottom line would probably grow by somewhere between 20 percent and 28 percent.
Read the full article in the Members Only section
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RRetailers, Servicers, Suppliers: A Call for Industry Participation
For more than 75 years, the North American Retail Dealers Association has been the voice of independent appliance, electronics, bedding and furniture retailers. Through education, representation and a host of benefits, NARDA has worked diligently for all retailers.
Here’s how you can help both the industry and your own enterprise: NARDA is now moving forward into new areas and seeks volunteers that can give an hour or less each month to help guide the association. Please indicate your interest and you will be contacted and given more information.
NARDA also is asking you to identify the areas in which it can assist you and your business. Whether it is legislation, education, legal services, publications, repair service or cloud-based services, please indicate which issues are most important to you. The very best suggestions will receive a $100 gift card.
Please express your willingness to volunteer and suggestions to email@example.com.
2011 CODB Survey Now Available
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