Welcome to the Bottom Line Top Line Podcast with Carol Bartlett, Jol Hunter, and Chris Spurvey.
This week on the podcast, Chris, Jol and Carol talk about the profit formula, what it means to the client, and the effects of cost-cutting on the business.
To download the document, scroll to the bottom of these show notes and fill in the form.
A Mathematical Perspective on Business
One way of looking at your business is as the mathematical formula for creating profit. If you think about the profit formula from a mathematical point of view and then think about the elements of the formula, you can figure out what you can do to make the result what you want.
Purpose of Increasing the Profit Margins
Every strategy in every business, if you peel it all the way back, is designed to do one of two things: increase payments to the company or decrease payments out of the company.
One way or another—and it may be a long route— that’s what businesses are designed to do.
Low-Margin Businesses vs. High-Margin Businesses
In low-margin businesses, processes are usually very well developed and look at the cents and the seconds. These businesses set their units of measurement so that everybody in the company is very aware that it takes a lot of volume to make any amount of profit.
The oil & gas industry usually is a very high-margin business. But during the economic downturn we had to look at every single expense line item. The problem is that we had to define the cause of each expense, so it was no longer good enough to look at, for example, the office supplies category. Instead, we had to look at the detail of pens, paper, etc. and figure out what we could eliminate. In other words, looking at the expense category was no longer sufficient. We had to break it down further than that. And that required discipline.
To learn more about these topics, please listen to the episode.
Mentions
Connect with Carol, Jol and Chris on LinkedIn.
The Profit Formula