by MHolland | Jan 3, 2025 | Business Tips, Cash Flow, Systems
Is a 1% improvement really worth the effort?
Absolutely. In fact, tweaking your margins by just 1% could send your profits soaring by 10%—or more. It is not magic; it is math.
And for businesses with tight margins—like construction companies, property managers, and flower growers—it can mean the difference between barely scraping by and thriving.
Here is how small changes can lead to big results.
Why Margins Matter More Than You Think
Your profit margin is not just a number—it is your business’s pulse. Margins tell you how efficiently you are turning sales into actual profits. When margins are thin, there’s little room for error. But when you tighten them up—even slightly—the ripple effect on profits can be dramatic.
Imagine this: You are running a $2 million business with a 10% net profit margin. That is $200,000 in profit. Increase your margin to 11%, and now you are pulling in $220,000—a $20,000 bump without adding a single customer or working extra hours.
The 1% Fix in Action
Where do you find that magical 1%? Here are three quick wins:
- Raise Prices Strategically
Do not panic—this does not mean scaring off customers. Even a small price increase (1–3%) can have minimal impact on demand while significantly boosting margins. Communicate the added value your business provides to justify the bump.
- Cut Costs—But Smartly
Focus on expenses that do not directly impact quality or customer satisfaction. Negotiate better supplier terms, switch to more efficient tools, or streamline processes to lower labor costs.
- Reduce Waste and Errors
Errors and inefficiencies can quietly drain profits. Automate billing, optimize inventory, and double-check quotes to avoid costly mistakes. Every dollar saved goes straight to your bottom line.
The Hidden Multiplier Effect
What is so powerful about the 1% fix? It is scalable. Once you start thinking in terms of incremental improvements, you will spot more opportunities. Trim expenses by 1%, increase prices by 1%, and boost efficiency by 1%, and suddenly you are stacking gains.
For example: A property management company cutting vacancy times by 1% while raising rents slightly could see profits snowball over a year. Similarly, a construction firm reducing rework by 1% while negotiating better supplier rates can watch margins grow without adding overhead.
Check Your Numbers—And Keep Checking Them
The key to making this work is knowing your numbers cold. Regularly review your financials—especially gross and net margins—to track progress. Look for trends, red flags, and quick wins.
Better yet, work with an accounting partner (like us) who can highlight opportunities you might miss and help you implement changes that stick.
Ready to Boost Your Profits?
Small changes drive big results. Whether it is tweaking pricing, streamlining operations, or cutting waste, the 1% margin fix can deliver the 10% profit boost you are after—without overhauling your business.
Thanks for reading…
by MHolland | Dec 27, 2024 | Business Tips, Cash Flow, Systems
Budgets! That word can imply a lot to many people—extra work, restrictions (who wants limits in business?!), confusion (where do I start?), and procrastination (who has time at this time of year?)
With all that in mind, for those of you ready to create a budget for 2025, here are some simple guidelines to get started.
Know Your Fixed Costs
The starting point for all budgets is your fixed costs. Review the general expenses on your Income Statement for the past 12 months.
These expenses recur every month, regardless of sales volume, and include items such as:
- Rent
- Insurance
- Office and management salaries and wages (production wages can be treated as part of your cost of goods sold)
- Telephone
- Bank charges
- Vehicle expenses
- Marketing (discretionary, depending on goals)
To determine budgeted fixed costs, analyze your expenses over the past 12 months. Either calculate a monthly average or allocate costs by the month they occur (e.g., $3,000 for June insurance).
Take time to review each expense. Ask:
- Are we getting good value?
- Can we switch suppliers to save money or gain more value?
Know Your Other Balance Sheet Costs
Include additional costs not on the Income Statement, such as:
- Capital expenditures for vehicles, equipment, and technology.
- Principal portions of loan repayments.
- Dividend distributions to owners.
Know Your Gross Margin
Gross margin percentage is critical for determining your break-even sales.
Formula:
- Sales – Cost of Goods Sold (COGS) = Gross Profit
- Gross Profit / Sales = Gross Margin %
Example:
- Sales: $100
- COGS: $40
- Gross Profit: $60
- Gross Margin % = 60% ($60 / $100)
How Much Profit Do You Want to Earn?
Next, determine your profit target for 2025.
Example:
- Fixed costs: $120,000
- Additional costs:
- Dividends: $60,000
- Loan repayments: $10,000
- Capital expenditures: $20,000
- Retained cushion: $60,000
Total costs = $270,000 ($22,500/month)
With a 60% gross margin, break-even sales = $270,000 / 60% = $450,000.
Prove It! Work Backwards
Sales: $450,000
- COGS (40%): $180,000
- Gross Profit (60%): $270,000
- Fixed Costs: ($120,000)
- Net Profit: $150,000 (33%)
Subtract other costs:
- Capital expenditures: ($20,000)
- Dividends: ($60,000)
- Loan repayments: ($10,000)
- Cushion: ($60,000)
- Net: $0
The Final Number – Break-even Sales
Break-even sales are your “magic number.” Allocate monthly targets based on seasonality or divide evenly across 12 months.
Share this target with your team! Post it in meeting rooms and make sure your sales team knows your goals.
In Summary
- Determine fixed costs ($120,000 in this example).
- Add loan payments, dividends, capital expenditures, and cushion ($150,000).
- Know your Gross Margin % (60%).
- Calculate Break-Even Sales ($450,000).
Your break-even sales are your success threshold. Maintain consistent gross margins and control expenses to ensure a healthy business in 2025.
Thanks for reading—here’s to a prosperous 2025!
by MHolland | Dec 20, 2024 | Business Tips, Cash Flow, Selling Tips
Growing your business one customer at a time in the cold marketplace is expensive and slow…
Want to reach more customers and grow your business? Partnering with associations and non-competing businesses is a smart way to do it.
These alliances can expand your reach, boost credibility, and create win-win opportunities.
Here is how to make it happen…
Why Strategic Alliances Work
Alliances let you tap into existing customer bases. For example:
- Associations: They have large, engaged networks. Partnering gives you direct access to their members.
- Non-Competing Businesses: They serve the same customers but offer different services. Together, you can provide more value.
Think – a landscaping company teaming up with a property management company to offer bundled services.
Find the Right Partners
Not every business or association is a fit. Focus on those with similar goals and values. Ask yourself:
- Who already works with my ideal customers?
- Do their services complement mine?
- Are they respected in their industry?
For example, a church accounting service could partner with a non-profit software provider. Both serve the same audience but solve different problems.
Create Mutual Benefits
Successful alliances benefit both sides. Your proposal should show what is in it for them.
- Revenue Sharing: Offer referral fees or profit-sharing for leads.
- Customer Value: Combine services to create a better solution.
- Shared Marketing: Split the cost of campaigns to reach more people.
For example, a customs broker partnering with a logistics company for seamless cross-border shipping.
Leverage Associations for Credibility
Associations are gatekeepers. They can boost your credibility fast.
- Attend their events to network.
- Sponsor conferences to highlight your expertise.
- Offer value, like workshops or webinars for their members.
A flower grower might team up with a horticultural association to offer tips on sustainable farming. It is a win-win.
Use Technology to Collaborate
Digital tools make partnerships easy.
- Shared CRMs: Use systems like HubSpot to manage referrals.
- Co-Branded Content: Create joint blogs, emails, or social posts.
- Virtual Events: Host webinars or live Q&As together.
These tools save time and amplify your efforts.
Build Trust and Stay Connected
Strong partnerships need trust.
- Communicate often. Keep your partner updated.
- Deliver results. Do what you say you will do.
- Review and adjust. Check in to ensure the partnership works for both sides.
Happy partners stick around.
Measure Success
Track results to see what is working.
- How many leads or referrals did the alliance bring in?
- How much revenue came from the partnership?
- Are customers responding positively?
Use the data to refine and grow.
Final Thoughts
Strategic alliances are powerful. They open doors, create opportunities, and strengthen your business. Start by identifying the right partners and reaching out.
Thanks for reading…
by MHolland | Dec 13, 2024 | Cloud-based Accounting, Remote Work, Systems
Branding Is Essential
A colleague of mine at LeapZone Strategies has written a good Blog on the power of branding…
Here is the start of her Blog:
| “Listen up, in the wild jungle of today’s business world, blending in is the first step to being forgotten. You need a Brand Foundation that’s not just solid, but magnetic. We’re talking about crafting a brand that doesn’t just get noticed – it gets craved. Why? Because in a sea of endless choices and constant noise, the brands that win are the ones that connect on a deeper level. They’re the ones that spark something inside people, something that goes beyond just ‘liking’ a product or service.” |
To read the whole Blog please click here.
AI Is Everywhere
AI is getting a lot of attention these days. It seems to be the constant topic in online business feeds.
A lot is hype.
Some is not.
I have used it for help in writing a Landing page. I gave it to my Team for feedback.
There was no feedback. They loved it. Saved me a ton of time.
Some software claiming to use AI are exaggerating a bit.
What I mean by that is this – ALL software is AI.
It is intelligently helping you be more efficient and productive.
Think accounting software versus a calculator.
But it is just software code, doing what you expect.
And, heck, that is pretty cool when you think back to the dark ages…before computers.
Some, however, is mind blowing.
Don’t believe me? Try ChatGPT.
Here is a good Blog from the Freedom app people, sharing a ton of apps you can explore for a 40% gain in productivity (their claim).
To check it out, click here.
BDC Talks About AI
To prove my point that AI conversations are bursting forth everywhere, I checked on my latest BDC Blog…
And, lo and behold, they are talking about AI.
Please click here to check it out.
Thanks for reading…
by MHolland | Dec 6, 2024 | Business Tips, Cloud-based Accounting, Remote Work
Introduction
Service is what sets great businesses apart. It is the one timeless constant. It was true for a business in 1850. It is a fact now as well.
Customers expect personalized care, and your team thrives in an environment where they feel valued and empowered. For family-owned businesses like yours, building a culture of service is not just a strategy—it is an extension of your core values.
Creating and maintaining this culture takes intentionality.
The rewards are worth it: loyal customers, a happier team, and long-term growth that feels good.
Here is how you can do it…
Number 1 – Define Your Core Values and Live Them Daily
Your service culture starts with your values. Think of these as the guiding principles that shape how you treat both customers and your team. But there is the catch—values cannot just live on a wall poster or in an onboarding manual. They need to be visible in everyday actions.
Example:
A franchised business we worked with defined “transparency” and “teamwork” as core values. To bring these to life, they introduced a weekly team huddle where leaders openly discuss wins, challenges, and customer feedback. This keeps the team motivated to deliver outstanding service.
Key Metric:
- Companies with clearly defined core values see a 29% increase in employee satisfaction (Source: SHRM).
Number 2 – Empower Your Team with Clear Communication and Tools
Your team are your customers!
When they feel confident and equipped, they will naturally provide excellent service. Start by ensuring everyone understands what great service looks like in your business—and provide the tools they need to deliver it.
Do it with clearly defined Performance Standards. A clearly defined Performance Standard is one based in physical reality. If it is not visible in physical reality it cannot be measured. If it cannot be measured, it cannot be improved or managed.
Example – Answer the phone on the second ring.
This passes the above test. It is clearly observable as either done, or not done. It defines an aspect of Awesome Customer Service. Customers that get responded to quickly on the phone will feel more cared for.
Number 3 – Lead by Example
Your leadership sets the tone. If you treat every customer with care and respect—or step in to help a stressed-out team member—you are modeling the behaviors, you want to see.
Top-down management structures disempower people.
An inverted organizational chart has the business owner on the bottom. Serving the Team above him/her, who in turn serve the customers.
Does that mean the owner-leader has humbled himself into being a doormat?
No!
“Humility is not thinking less of yourself, it is thinking of yourself less.” C.S Lewis
“Humility is thinking more of others. Humble people are so focused on serving others, they do not think of themselves.” (Source Philippians 2:1-4)
Being at the bottom means you are responsible for serving everyone above you.
Being on the “bottom” in service to all does not mean poverty. Just the opposite. Being in service to more brings more rewards.
Number 4 – Build a Culture of Recognition and Growth
People who feel appreciated are more likely to go the extra mile. Regularly celebrate your team’s wins, both big and small, to reinforce the behaviors you want to see.
Ideas for Recognition:
- Create a “Service Star” award for employees who deliver standout customer experiences.
- Host a quarterly lunch to celebrate the team’s successes.
- Share customer compliments in team meetings or a company newsletter.
Example Metric:
- Teams with frequent recognition programs report 23% lower turnover rates, contributing to stronger, more cohesive teams (Source: Gallup).
Number 5 – Foster a Feedback-Driven Environment
Great service comes from a willingness to listen and adapt. Make it easy for customers and team members to share feedback.
Show them you are listening by acting on it.
Customer Feedback Tips:
- Use short surveys after service interactions.
- Ask for testimonials during your monthly Zoom reviews.
Number 6 – Keep Stress in Check
Stress is the silent killer of great service. To maintain a positive, productive team, ensure processes are streamlined and support is readily available.
Stress-Reducing Strategies:
- Streamline workflows with automation tools like Plooto for payments.
- Build a financial cushion for tight cash flow periods.
Example Metric:
- Businesses with proactive cash flow management see 20% fewer disruptions during busy seasons (Source: Small Business Trends).
Conclusion
A formidable service culture is more than a business strategy—it is a way of life that benefits everyone involved. By defining your values, empowering your team, and fostering a positive, feedback-driven environment, you can create a business where customers rave about your service, and your team feels proud to be part of the journey.
Call to Action:
What is one step you can take this week to strengthen your service culture? Whether it is recognizing a team member or asking for customer feedback, start small and build momentum. If you would like more ideas tailored to your business, let us connect during your next monthly Zoom meeting!
Thanks for reading…
