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Have you got more month than money?
This is Judi Otton with GrowthCast. Are you one of those business owners that I meet all the time that are working so hard, growing their businesses, making lots of sales, yet at the end of the month, they’ve got no money left. So frustrating! I get it.
There are a bunch of things that I want you to look at. I’m going to do a series of videos, but the first thing we’re going to talk about is margins. I want you to look at the margin for each individual product or service that you’re offering.
Most of the time, we look at margins on a combined basis. We look at gross margin or net margin. Gross margin being everything we’ve sold and everything it costs to sell that. But if you have one product with a very healthy margin and you have another product that’s losing money, you really don’t see that by looking at the combined numbers. And if you start selling more and more and more of this product that has a negative margin even though your sales go up, your profit will actually start going down. And if you don’t understand what’s going on – that every time you sell another one of these services or products, you’re actually losing more money – you’re really going to get yourself in a lot of trouble. And it’s certainly going to be very frustrating. So I want you to make sure that you understand the margin for each individual service or product that you’re selling. Make sure that everything’s included any labor, any shipping cost, any packaging, it’s all attached to the appropriate project and you’re updating it regularly. Of course, we’ve seen prices for everything go up. So if you’re still using raw ingredient prices from a year ago or maybe even six months ago, your margins are already out of date.
I realized that this can look like a lot of work but it can really really be beneficial to you. So make sure that you understand your margins on a product by product or service by service basis. Next week we’re going to talk about some of the inefficiencies that happen as you grow that can also be eating away at your profits and causing you to run out of money before the end of the month. This is Judi Otton with GrowthCast and I’ll be back next week with your Fiscal Fitness Tip of the Week.