Hi, I’m Mackey McNeill and I want to talk to you about growing your bottom line. What if by simply changing your focus you could build an amazing bottom line? One that truly reflects the risk and effort of ownership.
As I’ve worked in my own business and with thousands of other business owners in pursuit of prosperity, I’ve learned that there are five critical mindset shifts that help a business owner, not only profit but prosper. Bring your head and heart to work. Change your focus. Use data as a convener, a unifier. Stop being a fulcrum and build a wheel. Build a better toolbox.
Today, I’m going to talk about the power and possibility when you change your focus. When starting a business all the attention is on sales, as it should be. I mean, let’s face it, new businesses don’t come with a nice, neat package of ready-to-order customers. The playbook is work hard, grow sales, and the bottom line will follow. But when a business moves from startup to scale up,
if the telescopic focus on sales persist, profits languish. Businesses in scale up need a new playbook. Work smart, manage your big three, and not only profit, but prosper.
So what are the big three? The three metrics that require your attention in order to rock your bottom line, gross margin percentage, revenue per labor dollar, overhead to plan. Let’s look at a simple example to help you understand what I’m talking about. In our example, you can see that the big three metrics on the left hand-side, gross margin percentage, revenue per labor dollar, and overhead. So in our example we gathered our team together. We looked at our 2020 results, and we said, how can we improve by working smarter instead of just harder? So we first looked at gross margin because we know that gross margin has more impact on our bottom line than any other number on our income statement.
So we looked at our cost and we said, we can trim a little bit here and grow a little bit in sales, and come together with a 2.2 increase in gross margin. Then we looked at our labor costs and we thought, how can we manage to get a little more out of our labor costs? And we set a goal to increase our return per labor dollar 10 cents. We looked at our overhead and said you know we’ve got some costs that we can tweak. We can save $18,250.
So what do these small changes, very small changes make if we only increase sales 3%? You can see that we’re only talking about increasing our sales $75,000. If we make these changes, our profit will go from $205,000 to 316,350. That’s a $111,000 more, or a fifty 53% increase. That’s a wow in my book, without really working that much harder, we just need to really focus our attention on three metrics rather than one. And we can divide the work up among our teams so we can have a team that works on our gross margin, a team that works on our revenue for labor dollar, and a team that works on our overhead, therefore, creating some time freedom for the owner along the way. Win-win-win.
So what does this look like if I said I’m just going to continue my old playbook and I’m just going to continue to sell? I’m not going to worry about these other metrics. Well, if you decided to do that, you would have to increase sales more than three times or 9 1/2 % instead of just three. So if along the way you happen to grow yourselves by more than three percent with this plan, you could easily double or triple your bottom line.
I’ve seen companies make and achieve these kinds of plans over and over. And no, this isn’t smoke and mirrors or pie in the sky. These are real possibilities available to those who change their focus. And here’s the secret. Think about a time in your life when you made changes. When you try to make a big change, did you often fail? And when you decided to make a small change, were you often successful? Change is hard. Those who master change do so by making small changes again and again and again.
By focusing your attention on the big three, gross margin percentage, revenue per labor dollar, and overhead to plan, and making small changes in all three, you will rock your bottom line. If you’re ready to change your focus, go to theprosperityplaybook.com and download my free roadmap. There you’ll find dozens of tools to help you run your business more prosperously. If you found this video inspiring, please share the power of the big three with your community. Hit the like button, leave a comment, or send this video to your favorite business owner with a personal message.