How to REALLY Make More Money in Your Business
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by Robert Imbriale, Business Coach
You know how to make money. You know how to run your business. You may even know a thing or two about marketing your business. But do you know the true cost of making money with your business? When I ask this of the business owners I coach, the answers are always the same and usually includes a stunned "deer in the headlights" look on their face. The truth is that you must figure out the cost of making money and I am going to show you exactly how to do that right now. First, let me explain what I mean by the cost of making money. Let’s look at it this way. How much money do you have to make in order to take home a single dollar in net profit? Do you have to make 2 dollars, 5 dollars, 50 dollars, or even more? To find out how much money you have to generate to be able to take out a single dollar, you’ll need to take a close look at your sales. I like to do this on a monthly basis, so I will take a close look at how much gross income I’ve generated in any given month. With this number, I will then subtract my month’s expenses. Now you’d think that you’d have the final net number at this point, but you really don’t. What I then do is take a bigger-picture look at my average expenses per month for the past year. Then, I’ll look at my average gross sales for the past year. Your gross sales for the past year, divided by 12 will give you your monthly average gross sales. Do the same for your gross annual expenses. Now you’ll have a much better picture of where you stand. Look at your numbers for the past month and compare them to your annual average. Are you higher or lower than average this month? Let’s say that you have an average gross monthly income of $5,000 and monthly expenses of $2,000. Now you’d have an average monthly net income of $3,000. Are you with me so far? Great! Now look at your current month’s numbers. Let’s say that this month, you’ve sold only $4,000 in goods and services and you’ve spent $2,500. That would give you a net profit of just $1,500. So that would mean that this past month, your net income was below average. That is why you really must look at both your past month and your annual average together. What I like to look at is the following number, called a multiplier. You get this number by doing a little more calculating. Take your annual average gross income, and divide it by your annual average net income. The number you end up with is your multiplier. Let’s look at this as a real-time example to make sure it is clear. My annual average monthly income is $5,000 and my annual average expenses are $2000. If I divide 5000 by 2000, I get 2.5. That is the real number you are after! What it means, in this example, is that for every dollar I take home, I have to make at least $2.50. Or as a percentage, it’s 250%. Did I get your attention yet? Now when you calculate taxes on top of that, you’ll realize that the number is actually much higher, but for this exercise, we’ll stick with a simplified calculation. When I found my number it was much higher than 2.5. And as I coach more and more businesses, I realize that a multiplier of 5, 7 or even 9 is not unheard of. I wondered how any business could stay in business when every $9 in sales resulted in $1 in net profit, but they do. Think about it, almost a 10 to 1 ratio of sales to net profit! When you really understand that for every dollar of income that you bring home with you, you actually have to make many more times that amount, you begin to look at the money you’re spending in a whole new light. In fact the day I discovered these calculations, I was also looking at my phone bills. I had one for my portable phone, another for my calling card, and then I had my main phone numbers, and then the toll-free numbers. It was quite a task to say the least. When I took a close look at the bottom line, then figured out that my nearly $500 in phone bills that month would actually mean that I had to make almost $2100 in sales, I jumped a foot high! I immediately thought of how much of an opportunity cost it really was to have been paying so much for my telephone service. While I couldn’t just disconnect my phones, I knew I had to work hard to find a way to cut down on my monthly telephone expenses. I grabbed the phone and called a few folks in my personal mastermind group. I found long distance rates ranged all over the map. Some were high, some were lower, and all had confusing restrictions, rules, and other nonsense that had my head spinning in no time. Now you know why I never attempted this sort of thing before. It was daunting, but I knew that every dollar that I would shave off my long distance bill would be multiplied many times over, so I persisted. I spoke to telephone company reps, I spoke to network marketers, and I even spoke to the big three telephone companies. All this and I was still not happy. I just knew I could do better. My goal was to chop my phone bill down to size and I didn’t quit until I was able to do just that. Here’s what I did, and I encourage you to do it too. I found a company that charges one flat rate for your long distance. There are very few restrictions and you’ll always know what your telephone costs will be, no matter what - even if you spent the entire month on the phone! (As I can certainly do!) I liked this idea. And when I learned that I could use it with my portable phone, my toll-free number and I could use this same service in place of a calling card from any phone, I was really excited. I was able to cut my bill down from over $500 to less than a $100 in one fell swoop - and I could use the phone all I wanted? Now they had my interest! I had saved myself over $400 but in reality that number was much, much larger when you consider the multiplier factor. What I had really done was not only cut my expenses in this one area, but had improved my net income - the real goal of this exercise. You could also use this same process with your other recurring expenses. Here are some ideas you might want to look into. For your advertising, buy more of it at a time - advertising mediums will always give you a discount if you buy more than 1 ad at a time. I never buy less than 3 ad insertions at a time - the typical amount you need to buy to get a frequency discount. For your Internet service, look around for the best deal. You can now even find free Internet access from several providers that might suit your purpose. Join a barter network. I can usually get many items on barter that I would normally have to pay cash for. The services of particular interest are printing, advertising, and most office machines and supplies. The most important thing is keep an eye on the money that goes out the door. The less that goes out, the more you have left for you. When you consider that every dollar you bring home actually represents many more dollars in gross sales, you’ll tend to work much harder to keep as much money as possible in the business. You work hard for your money, and you deserve to take home as much of the money you make as possible. So pay careful attention to your expenses and always be on the look out for ways to chop the cost of your expenses down as much as possible. Think of how you can use the Internet to take some of the cost out of things like paying bills, banking, trading stocks, advertising, selling and now your long distance bill too. © by Robert Imbriale. All rights reserved. Robert Imbriale is an internationally known Business Coach, Speaker, Author, and Master Marketer whose work is currently published worldwide in over 16 languages. Thousands of businesses worldwide currently use his marketing strategies to increase sales and grow their organizations. Mr. Imbriale can be reached on the web at www.ambiznet.com or via e-mail at robert @ unlimitedleads.com
