The video below covers a how to increase proitss for solopreneur’s and small businesses. It cover some finance concepts related to –
- Profit Margin
- Increase Scale
- Decrease fixed costs
And gets into a lot or operatinal tips on how to increase prices and increase your capacity by automating, delegating and saying no. Check out the video for more information and the transcript is below.
Transcript –
Hello. I’m Paul Heffner, the owner of Finance Palls. And today I’m doing a video on how to increase your profits. I talk on this topic a lot. There’s a few differences about this video. I’m going to get into some of the operational things that people can do. And this is for a presentation I’m actually giving tomorrow that has a lot of Solo entrepreneurs and it of some of the slides and numbers are sort of adjusted for those those companies, A lot of the feedback is applicable for anybody who has a growing business. I wanna share my screen and go to the slides. This is also a fun way for me to practice my slides. before I actually give the presentation tomorrow. So it’s basically the three things we’re gonna talk through. proper margin is one. And this is very heavily focused. You know, it’s normally your price to charge minus cost of goods sold. And for this topic, we’re focusing mainly on the on the price part of it because a lot of people are are solo entrepreneurs. So we’ll talk a lot about price increasing. We’ll talk about increasing scale, which is something I’ve covered before. I’ll cover on the slide, but it’s basically about covering a fixed cost and then growing and getting more revenue to cover those fixed costs. And then one slide on decreasing your fixed cost, which is not a sexier way to to increase your profit. The [resentation I am giving tomorrow, there’s a group of about ten to twenty people. And so they have a lot of other business minded folks that might have other ideas. So I’m gonna use their ideas as well. And if anybody watches this, and wants to put comments then I’d love to hear your ideas as well. So the first part is I I think price increasing is it’s sort of like the one of those magic bullets, but nobody does it sort of like eating healthier, working out, or I don’t know, a lot of other things. It’s like it sounds good. But then when you actually have to go and do it, it’s not as fun or easy to do these things. So I’m gonna start with talking about concerns people have. I think a lot of times, it’s around not being able to complete the sale. You know, the the big objection that people are worried if they increase their prices, then all of a sudden, they won’t get any customers, and then they won’t have any business. I think it’s probably the biggest concern, but I will see what other people say. I’ll list on another slide some other sort of things that I do. But, you know, just think through what are the reasons you’re not, and if there’s other reasons I’d love to hear them. And and so this goes over that first objection. , in this example, if your profit margin is forty percent. And actually sorry. I want to thank Scott Barth. He’s he’s an exit planner. who originally showed me this slide. But basically, if you have forty percent profit margin and you increase your price by ten percent, then your sales would need to fall by twenty percent, and that’s all all of your sales. , obviously, you know, if you could just increase it, you know, two percent you know, double, if you’re just you’re just about two percent, then, your sales would have to fall by by that amount. So this is just a a way to sort of get a little comfortable with it. And who knows, maybe if you do increase your price 10 percent, you know, twenty percent of your customers would would not sign up. or would not stay with you, but more and more what I’ve heard especially with post COVID and inflation and all sorts of other great stuff. People are sort of expecting these price increases to be coming and you can make it easier on your customers for planning and letting them know ahead of time and also It just makes it easier on on yourself managing it. So there’s a few ideas I have on that later. So these are the the ideas that that I typically implement. The the first one and this was I told him a long time ago. I don’t know where I heard it, but, you know, if you’re considering a price increase and you’re worried about the conversion rates or different things, trial it out for new customers and try it out, when you’re solopreneur or just have, you know, business of one. and and you don’t have much more time. You only have time to maybe do one more client instead of just taking the next client that comes in, they will I’m going to increase my rates you know, ten or twenty percent for the flying or or, you know, I think my my wife has a fee schedule that, like, you know, just ridiculous, but she doesn’t wanna take on any, you know, extra work, you know, on your job. But if somebody wants to pay, you know, a crazy rate, then she will, you know, be more likely need to to get excited about it. So that’s the first one to try out from your customers. Another one is to do it sort of every year, you know, the same time years, your customers sort of expected. You could also build the, you know, that language into your contract, say, hey, we’re gonna increase pricing. every year. And that way, you know, it’s just you don’t even have to to an email, like, that was in the contract. You know, every year, we’re gonna increase by five percent or two percent or or whatever to whatever makes sense for your your industry. And I think that’s I think that’s pretty common. The the next call is don’t be lazy. This was mainly around around me, but I think a lot of times It takes work to to go in there and, you know, if you have your pricing and QuickBooks your services and and you’re doing it that way or even just reach out to your customers and say, hey, we’re gonna increase pricing and it’s just because there’s that step. So some stuff later, but I would find a way to have somebody either help you with this. You know, I add sort of an admin type person, send out a bunch of emails last year that basically said, you know, reach out to every every person and say, you know, here’s our new pricing, and we have the the benefit of Both you need to do bookkeeping and CFO or not bookkeeping, but also a tax return. And so we’re sort of saying, here’s our tax rate for this year, here’s our bookkeeping rate until we’re, you know, talking about all those things. And I think there’s probably a million other ways to increase pricing. Actually, there there’s one one firm that we work with at one company, and they have do more a b to c business. They have people out doing estimates and pricing. And they have, you know, a Google sheet that is their estimating form. so they can go in and change the variables in that form, and then ultimate estimates will automatically be higher. And so they have in the year of twenty twenty two. They’ve I know they’ve increased price getting at least four times, probably five times by now. So just as you know, whatever it is, changes their their cost materials, their labor costs, or they’re just, you know, worried about profit. They’re gonna do that. And they might see how that, you know, impact their conversion rate, if they track all those really, really well. So the next part is scale, and this is and how to move just a box. Second minute. Okay. The And I covered all whether there’s this charge down here at the bottom. So you have your your your I don’t know if I can move that to you there. your fixed costs here in Blue. These are sort of your variable costs as your revenue. I guess, if you just performed as your sales go up, your variable costs go up, and then it’s green lines your torque cost. which shows your breakeven. But then, you know, as you continue to increase your scale, your profit goes up, which is what this chart is trying to show. and this just shows it here in numbers. This is for, you know, company that’s making close to two hundred fifty k in revenue. We talked about profit margin. And, you know, I think something to consider here is is I was tailoring this for so entrepreneurs is I think a lot of entrepreneurs don’t have any cost to get full. You know, it’s just them to do their time. Maybe they have, you know, who costs or they have some material costs or something of it. It’s pretty minimal. It’s just their time. They don’t have any, for the most part, employee cost, which is a big part of COGS or, you know, maturities or not, you know, maybe if they’re a painter or you know, those types of businesses that have, you know, gas water, materials cost and then maybe they have some for most part of their time. And so As I was thinking about this, I was thinking about their billable percent because maybe they’re doing a lot of other things, like, and, you know, writing marketing emails or sending invoices or doing networking events are doing all different even just doing estimates or different things. And so all the, you know, writing contracts, all those different things are not billable. And so I sort of, you know, put the plan on what if, you know, that percentage was lower because you have some amount available. You could either, you know, hire somebody to do that work, which is coming up on the in the later slide. or or just thinking about that if you can increase that billable percentage a little bit, then that will also increase your your your profit. And then these are some of the pick drop. I just put in your rent insurance. This owner draw could be salary or different things, and then all this comes to an annual cash flow. So this is a breakeven scenario, which is shown right here. And then, you know, as you increase your revenue, you know, your profit goes up. And if you increase your margin a little bit by increasing your prices, which you were covered up, you would go this way. And so I I sort of see this, you know, and this I can change his numbers and do different things. I love the three tables. But the the the point of this for me is a lot of times and you may get pushed back on it, you know, continuing to increase prices. But, you know, if you can the sometimes the better solution is to increase your scale. That’s where that was the point of the slide. And so then the the next part is you know, thinking about your scale, what are your constraints to to changing the scale? And you know, this community a lot of times, you know, for bigger businesses, it’s hiring people and labor labor shortages and turnover and and all those things. I think that I worked with a a tree trimming company and, you know, their constraints are they in the two. have equipment, you know, I would call it the the machine that you shove the trees through the, you know, mix it into wood chips. I don’t know what that’s called, but they that that grinder machine. They need they only have those so even if they have more jobs, they have more people, they only have at least right now, they only have two of those machines to those machines to actually get driven around to different types. regardless of of where the other stuff is. And so there’s strength like that. But but when I really you know, where I was going with the the the openers, I think it’s gonna be your your time. And so if you’re spending time doing invoicing, doing marketing, going to networking, doing whatever other task, you know, you’re doing that that is taking away from sort of your billable time. So if you can increase your billable time, and I think that will have a a dramatic impact on your, you know, your total revenue and and your profit. we’ll see what other people have on on their their constraints. And so there’s basically two two things two advice parts to to increase your scale. One is to get more customers. I won’t get into this philosophy that doesn’t really go any any specific things related to, you know, sort of the smaller businesses. But, you know, these are just a few ideas asking for referrals, add on services. You know, this is you know, finance calls in a nutshell. We started doing PFO work, and then we expanded the bookkeeping, and we expanded the tax, and then we’re always, you know, considering doing other other services or expanding and we started doing tax. It was just business returns and we expanded personal returns and we’re always sort of looking for what our clients are asking for and seeing if that’s a service that we want to to add or not. And then, obviously, you can, you know, do more networking and marketing and things like that. I think and there’s, you know, entire people who are specialized in in getting more customers. So I won’t spend a lot of time on that, but I think it’s an interesting way to to think about it. But the the more, I don’t know, actionable invites that sort of improving operation. So I would think through, you know, what you can automate or what processes. You know, the people and processes of of of a business those are to the the levers. I think you have more in terms of automating. So what can you do in terms of your your contracts that you’re sending out to customers? Your scheduling of your time? And, you know, scheduling with new clients or even your existing clients. Invoicing, you know, is their way if you’re invoicing, you know, hourly where you can you can use software like QuickBooks time to do that. AR reminders if somebody hasn’t paid. Could you have people pay you upfront? Could you have, you know, automated or not automated credit card billing through bill dot com or something like that. Can you auto pacify your bookkeeping transactions? These are a lot of things that that we help our clients with. But but it’s also, you know, anybody can sort of find their own solutions to automate or improve some of these call it back office or or time stocking task. The next part is around delegating. It’s already mentioned even some software, but another one tier account employee is is one for scheduling. And and also hires the people upwork, you know, has great resources all over the world. that can help you do some of these admin tasks or other things like that. Loom is as a video recording thing for, like, training and Tango. is I’ve been I haven’t used Tango. I’ve looked at it. Loom does everything in my mind that Tango does for the if the video NVIDIA is better than sort of a guide. but can you go to create the guide to try to record what you do and and create the guide? I I like this third bullet here saying no. something that that I am trying to get better at. There’s a a podcast from Engraving McEwen, I think. and he has a lot of stuff around no and and sort of setting up your day and things like that. So you know, what could you say no to in terms of, you know, there’s some clients that are sucking up your time and not paying enough or even just, you know, taking on meetings, you know, networking meetings or other other meetings. email, I put in all caps. I think McEwen talks a lot about, like, if you wake up and your first thing you do is you check email for two hours, and then you’re in, like, panic mode. You’re trying to respond all emails, and then, like, you check again, like, two hours later, and you’re just, like, worried that you’re you’re missing email. there’s any way you can develop a process to have a admin person, go through emails, or as as you’ve been seen, people have auto reply that says, hey, I only check email twice a day. You you know, or or whatever it is just so you don’t feel like you’re not because if you once you do that, you’re you know, that might one that might be your best productive time of two hours, you know, first thing in the morning where you can really knock off, you know, high priority difficult path or it just you you may also get completely blindsided and distracted and go off like really change and and and waste a couple hours. Social media, LinkedIn, Facebook, whatever people are using. You know, I think all the things if you can limit the amount of time you’re doing those things. It’ll free up your time for for billable times. And then, again, love to hear other other ideas on improving operations. This is a quick slide. You know, and I think you can spend a lot of time on decreasing fixed costs. busy looking at software you’re using. My wife once had a a credit check software. I don’t remember what company it was, but she signed up for it once for something. she actually forgot about it for, like, two or three years and they build it every month for, like, two or three years. And one day, we were going through and said, what is this? Seven dollar bill or whatever? and then we canceled it. But, you know, I don’t I don’t mean we paid a a lot of money that we didn’t have to if we had just gone through and and checked it every once in a while. interest paid on credit cards. Obviously, you wanna pay those down if you’re able to or if you have lines of credit or different things, you can reshuffle those things credit card processing for your your bills for invoicing that your customers are paying. There might be ways they can pay you by check or Zelle or or or just a way to to potentially not use credit card, maybe ATH. It’s closer to one percent to the three percent. There’s lots of other options there. meals and and going out, you know, there’s another cost or travel or there’s not the other top categories you can look at and say, are there other ways for for savings? This is one just sort of flipside is with interest rates going higher, we’re recommending a lot of our clients to look at if they have a savings account that’s making, like, point zero zero zero one percent. There’s a lot of, you know, savings account now that are paying, like, two or three percent. And I who knows by the time you watch this video, it may even be higher. And so, you know, free free money if you just take a little time to invest in figuring out where to put that And then there’s just a quick note, you know, some people will sort of go last about meals and travel and eat like that because they think that they’re sort of lowering their their taxes, which is true, you know. But but it’s also balancing that versus losing your profit. And then it depends on your business, you know, I think a lot of time. you can prepay expenses and do different things, and then your rent and other things to lower your taxes, which is great. But then if you’re gonna try to spell your business or try to do other things, then it’s it’s always not the not the best. So there’s just a quick note on, you know, Big Shot and sort of summing it up. So here’s my conclusion. You know, I think everybody should be looking at increasing prices or coming up with system for how they can increase prices easier, increasing scale, you know, find a way to improve those operations, what can you automate through you know you know, better processes and systems, looking to delegate to, you know, outsourced providers, people overseas, or or just, you know, admin, staffing hire, and what can you say, no to just to, you know, completely create for time or or or just change your your schedule so that you’re able to be more productive and then with for savings in your fixed cost. So thank you for watching. Love to hear any feedback. And hope you all have great days. Thank you.