Dec. 31, 2024

The Profit Multiplier: Finding Money Hidden in Plain Sight

The Profit Multiplier: Finding Money Hidden in Plain Sight

This focuses on helping business owners identify and eliminate profit leaks while maximizing existing revenue streams

Powerful Business Strategies is broadcast live Mondays at 12 Noon ET Music on W4CY Radio...

iHeartRadio podcast player icon Spotify podcast player icon Amazon Music podcast player icon Pandora podcast player icon Audible podcast player icon Deezer podcast player icon Podchaser podcast player icon Spreaker podcast player icon Apple Podcasts podcast player icon Youtube Music podcast player icon Podcast Addict podcast player icon JioSaavn podcast player icon Castbox podcast player icon Castamatic podcast player icon Castro podcast player icon Fountain podcast player icon Goodpods podcast player icon Overcast podcast player icon PocketCasts podcast player icon Podurama podcast player icon Podverse podcast player icon Podyssey podcast player icon RSS Feed podcast player icon YouTube podcast player icon
iHeartRadio podcast player icon Spotify podcast player icon Amazon Music podcast player icon Pandora podcast player icon Audible podcast player icon Deezer podcast player icon Podchaser podcast player icon Spreaker podcast player icon Apple Podcasts podcast player icon Youtube Music podcast player icon Podcast Addict podcast player icon JioSaavn podcast player icon Castbox podcast player icon Castamatic podcast player icon Castro podcast player icon Fountain podcast player icon Goodpods podcast player icon Overcast podcast player icon PocketCasts podcast player icon Podurama podcast player icon Podverse podcast player icon Podyssey podcast player icon RSS Feed podcast player icon YouTube podcast player icon

This focuses on helping business owners identify and eliminate profit leaks while maximizing existing revenue streams

Powerful Business Strategies is broadcast live Mondays at 12 Noon ET Music on W4CY Radio (www.w4cy.com) part of Talk 4 Radio (www.talk4radio.com) on the Talk 4 Media Network (www.talk4media.com). Powerful Business Strategies is viewed on Talk 4 TV (www.talk4tv.com).

Powerful Business Strategies Podcast is also available on Talk 4 Media (www.talk4media.com), Talk 4 Podcasting (www.talk4podcasting.com), iHeartRadio, Amazon Music, Pandora, Spotify, Audible, and over 100 other podcast outlets.

Become a supporter of this podcast: https://www.spreaker.com/podcast/powerful-business-strategies--6198916/support.

WEBVTT

1
00:00:00.080 --> 00:00:02.319
The topics and opinions expressed in the following show are

2
00:00:02.319 --> 00:00:03.960
solely those of the hosts and their guests and not

3
00:00:04.000 --> 00:00:06.919
those of W FOURCY Radio. It's employees are affiliates. We

4
00:00:06.960 --> 00:00:10.039
make no recommendations or endorsements for radio show programs, services,

5
00:00:10.080 --> 00:00:12.119
or products mentioned on air or on our web.

6
00:00:12.359 --> 00:00:13.560
No liability explicit or.

7
00:00:13.560 --> 00:00:15.800
Implies shall be extended to W four CY Radio or

8
00:00:15.800 --> 00:00:18.559
it's employees are affiliates. Any questions or comments should be

9
00:00:18.600 --> 00:00:21.079
directed to those show hosts. Thank you for choosing W

10
00:00:21.160 --> 00:00:23.280
FOURCY Radio.

11
00:00:27.359 --> 00:00:30.920
Welcome to Powerful Business Strategies, where you will find out

12
00:00:30.920 --> 00:00:34.240
that everything you have ever learned about growing your business

13
00:00:34.560 --> 00:00:38.320
is wrong. Finally, a show where you'll learn the right

14
00:00:38.359 --> 00:00:41.679
way to grow your business by learning business and financial

15
00:00:41.719 --> 00:00:47.000
strategies that your competition isn't doing. And now here's your host,

16
00:00:47.399 --> 00:00:52.560
the resident of NeXTSTEP CFO Michael Barbarita. And joining Michael

17
00:00:52.640 --> 00:00:56.759
for today's show as an executive moderator is chooky obia.

18
00:01:00.560 --> 00:01:04.400
Yes, this is schooking. I believe that gratitude is undefeated

19
00:01:04.519 --> 00:01:05.879
and growth is about.

20
00:01:05.640 --> 00:01:06.480
The next step.

21
00:01:06.680 --> 00:01:10.040
It is an honor for me to moderate today's discussion

22
00:01:10.079 --> 00:01:13.400
with my good friend Michael. Michael, how are you hey?

23
00:01:13.439 --> 00:01:16.120
How you doing, Choky? How is your Christmas? It was nice?

24
00:01:16.159 --> 00:01:18.760
It was nice. And look, I've got my notepad and

25
00:01:18.840 --> 00:01:20.760
my pen. I'm ready to take some notes today. I

26
00:01:20.760 --> 00:01:22.799
feel like it's going to be an energizing show.

27
00:01:23.200 --> 00:01:26.439
Excellent, excellent it is. And my name is Michael Baberia,

28
00:01:26.519 --> 00:01:29.599
President of Next Step CFO. And next Step CFO is

29
00:01:29.640 --> 00:01:34.760
a fractional CFO and strategic implementation firm, and our vision

30
00:01:35.319 --> 00:01:38.879
is to ensure that overwhelmed business owners achieve the time, freedom,

31
00:01:39.239 --> 00:01:42.439
and consistent profits to build a legacy and the life

32
00:01:42.519 --> 00:01:47.239
they desire. Our mission is dedicated the guidance small business

33
00:01:47.239 --> 00:01:50.959
owners to leveraging their time, exploding their profits, and building

34
00:01:51.040 --> 00:01:55.239
a meaningful legacy. This show powerful Business Strategies that our

35
00:01:55.239 --> 00:01:58.359
book of the same name, is a step towards accomplishing

36
00:01:58.359 --> 00:02:01.120
that vision and mission. With that, I'd like to hand

37
00:02:01.120 --> 00:02:03.280
it back to my co author and moderator for the show,

38
00:02:03.400 --> 00:02:04.120
Chicky Olbio.

39
00:02:04.799 --> 00:02:07.239
Michael, you were kind enough to ask how my Christmas was?

40
00:02:07.400 --> 00:02:08.120
How was yours?

41
00:02:08.560 --> 00:02:12.520
Oh? Very very good. I only worked four hours. Okay,

42
00:02:12.560 --> 00:02:13.080
there you go.

43
00:02:13.520 --> 00:02:16.759
Well, look it's interesting that we're, you know, thinking through

44
00:02:16.919 --> 00:02:22.520
the holiday season. Today's episode is titled The Profit Multiplier,

45
00:02:22.759 --> 00:02:27.919
Finding Money and Hidden Plane Sites. So Michael, look, I'm

46
00:02:28.039 --> 00:02:31.159
actually quite excited because I do think I need to

47
00:02:31.199 --> 00:02:33.240
find some money. A lot of business owners need to

48
00:02:33.280 --> 00:02:38.000
find some money as holiday season, right, so look really quick. Disclaimer, folks,

49
00:02:38.039 --> 00:02:39.719
Michael and I were both affiliated with a number of

50
00:02:39.759 --> 00:02:42.919
different organizations. I currently serve as a managing director of

51
00:02:43.439 --> 00:02:47.120
business development for Veta Price, a global business focused law firm.

52
00:02:47.560 --> 00:02:49.919
In addition to that, it's truly an honor to collaborate

53
00:02:50.000 --> 00:02:55.159
with Michael to moderate business roundtables and document the insights

54
00:02:55.159 --> 00:02:59.000
from those roundtables as part of our book Powerful Business Strategies.

55
00:02:59.400 --> 00:03:02.280
But please know that the views expressed on this show

56
00:03:02.360 --> 00:03:06.639
are personal views based on successful experiences, and my mission

57
00:03:06.680 --> 00:03:10.039
as a fearless moderator is just to ask the right questions,

58
00:03:10.439 --> 00:03:15.360
take some notes, help you and me learn the best

59
00:03:15.599 --> 00:03:19.039
strategies that the competition isn't doing. Michael, back over to you.

60
00:03:19.560 --> 00:03:23.719
Thank you, Chicky and Chicky. Last week I announced a

61
00:03:23.759 --> 00:03:26.960
little different kind of a program that business owners can do.

62
00:03:27.879 --> 00:03:30.159
If they have a business problem that they'd like us

63
00:03:30.199 --> 00:03:33.639
to answer, or a business question or a strategy that

64
00:03:33.680 --> 00:03:36.639
they'd like to ask about. They could email us. They

65
00:03:36.639 --> 00:03:40.840
could email us at ask at NEXTSTEPCFO dot net. That's

66
00:03:41.039 --> 00:03:47.240
ask ask at next STEPSDFO dot net. And it doesn't

67
00:03:47.280 --> 00:03:50.039
matter what the business problem is or the question, and

68
00:03:50.120 --> 00:03:52.520
we will answer it for you. There are a couple

69
00:03:52.560 --> 00:03:54.759
of things that we ask. Number one, please state whether

70
00:03:54.919 --> 00:03:57.159
it is something we can answer on the air or

71
00:03:57.199 --> 00:04:00.000
if it is confidential, and of course if it's confidential,

72
00:04:00.199 --> 00:04:02.520
we won't answer it on the air. And number two,

73
00:04:03.080 --> 00:04:06.199
please provide your phone number because business problems can be

74
00:04:06.319 --> 00:04:10.360
complex and we might need more context or clarity. And

75
00:04:10.719 --> 00:04:13.080
if you're one that doesn't want us to answer the

76
00:04:13.159 --> 00:04:15.879
question on the air, we need to call you and

77
00:04:15.919 --> 00:04:19.360
give you the answer. And that email address, once again

78
00:04:19.639 --> 00:04:25.560
is ask at NEXTSTEPCFO dot net. And so as a

79
00:04:25.600 --> 00:04:28.199
little opening for today's show, I like to open. I

80
00:04:28.279 --> 00:04:31.959
like opening with a little inspiration. So what amazes me

81
00:04:32.279 --> 00:04:35.319
is that every day I watch business owners walk into

82
00:04:35.319 --> 00:04:38.480
their stores, open their laptops, or head to their job

83
00:04:38.600 --> 00:04:42.720
sites not just to make money, but to make a difference.

84
00:04:43.639 --> 00:04:47.600
And while others play it safe with steady paychecks, business

85
00:04:47.680 --> 00:04:50.680
owners chose to bet on themselves. And for the business

86
00:04:50.720 --> 00:04:54.120
owners out there, you are the ones creating jobs in

87
00:04:54.160 --> 00:04:57.920
your community. You're the ones lying awake at night figuring

88
00:04:57.920 --> 00:05:01.800
out how to make payroll, the ones missing family events

89
00:05:01.839 --> 00:05:04.519
to serve your customers. And you're the ones who keep

90
00:05:04.560 --> 00:05:09.399
pushing forward even when it feels like everything's pushing back.

91
00:05:10.160 --> 00:05:12.519
And I see you working early mornings before your team

92
00:05:12.639 --> 00:05:15.879
arrives and late nights after they're all gone home, and

93
00:05:15.959 --> 00:05:18.920
I see you solving problems nobody else wants to tackle.

94
00:05:19.560 --> 00:05:21.920
I see you putting houses on the line to fund

95
00:05:21.920 --> 00:05:26.279
your dreams. You're not just business owners, your dream builders,

96
00:05:26.279 --> 00:05:29.160
your job creators, your community leaders. And even though it

97
00:05:29.279 --> 00:05:33.240
often feels lonely at the top, know this, what you

98
00:05:33.639 --> 00:05:39.040
do matters. Yes, your courage to keep going inspires others

99
00:05:39.079 --> 00:05:41.360
to do the same. So to every business owner out

100
00:05:41.360 --> 00:05:45.160
there making it happen every day, I see you, I

101
00:05:45.240 --> 00:05:49.120
respect you, and I applaud your relentless spirit to build

102
00:05:49.160 --> 00:05:54.839
something meaningful. So, Chokie, today we're going to explore why

103
00:05:54.879 --> 00:05:59.560
everything you've ever learned about profitability is wrong. And you know, just, yes,

104
00:05:59.839 --> 00:06:04.240
just yesterday, actually the Friday, I was working with a

105
00:06:04.439 --> 00:06:08.759
business owner who told me, Michael, sales are up, but

106
00:06:08.800 --> 00:06:12.199
our profits are down. How was that possibly asked, Well,

107
00:06:13.600 --> 00:06:18.079
this happens more than you might think. Business owners focused

108
00:06:18.120 --> 00:06:21.199
so much on the top line that they missed profit

109
00:06:21.279 --> 00:06:23.839
opportunities right under their nose. And think about it. Most

110
00:06:23.839 --> 00:06:26.439
businesses look at their p and L monthly or quarterly,

111
00:06:26.959 --> 00:06:31.319
check their sales and maybe their bottom line maybe and

112
00:06:31.439 --> 00:06:35.160
think they got it all handled. But that's like trying

113
00:06:35.199 --> 00:06:38.680
to drive a car by looking in the rearview mirror.

114
00:06:38.759 --> 00:06:42.879
So today I'm going to show you exactly how to

115
00:06:42.879 --> 00:06:45.639
find hidden profits in your business. I'll show you how

116
00:06:45.720 --> 00:06:48.560
one business discovered they were actually losing money on their

117
00:06:48.600 --> 00:06:52.800
biggest customer and I was fixing this one issue double

118
00:06:52.839 --> 00:06:56.360
their bottom line even better. Their customer thanked them for

119
00:06:56.399 --> 00:06:59.600
making this change. And they're also going to reveal what

120
00:06:59.639 --> 00:07:02.920
I call the profit multiplier system, and it's a systematic

121
00:07:02.959 --> 00:07:06.319
way to uncover and capture hidden profits in your business.

122
00:07:06.759 --> 00:07:09.920
And the part, the best part is you could start

123
00:07:10.000 --> 00:07:14.040
finding these profits this week without needing to make a

124
00:07:14.160 --> 00:07:17.319
single new sale. So stay tuned as we break this down.

125
00:07:18.319 --> 00:07:21.319
And if you're driving, don't worry. You could catch the

126
00:07:21.360 --> 00:07:25.519
episode again on our podcast at Powerful Business Strategies dot com.

127
00:07:25.560 --> 00:07:30.120
So let's dive into the first major area, where hidden

128
00:07:30.160 --> 00:07:34.839
profits exist, and I call it revenue leaks. And these

129
00:07:34.879 --> 00:07:37.600
are places where money is flowing out of your business

130
00:07:37.639 --> 00:07:41.319
without you even realizing it. And let me share three

131
00:07:41.399 --> 00:07:44.920
examples that will show you exactly how this works. And

132
00:07:45.040 --> 00:07:50.360
first there's a manufacturing company was consistently showing gross margins

133
00:07:50.360 --> 00:07:53.959
of thirty five percent, but when they did a deeper

134
00:07:54.079 --> 00:07:58.800
dive into their pricing model, they discovered that forty percent

135
00:07:58.839 --> 00:08:03.360
of their orders were actually losing money. And here's what happened.

136
00:08:04.319 --> 00:08:07.279
They had this standard pricing model that worked great for

137
00:08:07.399 --> 00:08:11.759
all the orders over ten thousand dollars, but for smaller orders,

138
00:08:12.839 --> 00:08:18.560
they discovered that the setup costs were higher. They they

139
00:08:18.639 --> 00:08:22.920
discovered that the material waste costs were higher, that the

140
00:08:23.079 --> 00:08:29.920
labor costs were disproportionately unfavorable, that shipping costs weren't fully covered.

141
00:08:31.839 --> 00:08:34.519
Admin costs ate up a lot of their margins for

142
00:08:34.559 --> 00:08:39.360
those smaller orders, and rush orders weren't properly priced. And

143
00:08:39.399 --> 00:08:44.120
so by implementing a new tiered pricing system, they introduced

144
00:08:44.120 --> 00:08:48.919
minimum order requirements to the minimum orders set up. The

145
00:08:48.960 --> 00:08:52.559
setup fees were for small they set up and they

146
00:08:52.600 --> 00:08:55.080
had set up fees for small orders, where previously they

147
00:08:55.080 --> 00:08:59.679
did not. They had rush order premium, so if you

148
00:08:59.720 --> 00:09:02.440
wanted it fast, you had to pay a little extra.

149
00:09:03.240 --> 00:09:07.480
They had volume discounts that were structured properly, shipping cost adjustments,

150
00:09:08.039 --> 00:09:13.200
and administrative fee allocations. Their bottom line increased three hundred

151
00:09:13.200 --> 00:09:16.039
grand in the first year. They didn't lose any customers,

152
00:09:16.440 --> 00:09:20.559
and in fact, many small customers started bundling orders together

153
00:09:20.600 --> 00:09:24.159
to meet those minimums and actually making them more profitable

154
00:09:24.159 --> 00:09:27.879
to service. But here's the key. You know, if you're

155
00:09:27.919 --> 00:09:31.799
hearing this, you're saying, yeah, sure, they didn't good any customers,

156
00:09:31.799 --> 00:09:35.320
not at all. Well, here's why they had that. They

157
00:09:35.559 --> 00:09:41.720
they didn't sell on price, they sold on value. They

158
00:09:41.720 --> 00:09:45.200
had a strong position of market dominance, and they were

159
00:09:45.320 --> 00:09:48.960
able and because of that, their customers didn't want to leave.

160
00:09:49.759 --> 00:09:53.519
They had solutions to their customers' problems that nobody else tackled,

161
00:09:53.799 --> 00:09:56.799
or if they did, if they did tackle it, they

162
00:09:56.799 --> 00:10:02.480
weren't telling anybody. So that's a lot of the situations

163
00:10:02.919 --> 00:10:06.360
that I'm going to talk about this today have everything

164
00:10:06.399 --> 00:10:10.360
to do with the reason why some of these price

165
00:10:10.440 --> 00:10:16.320
increases work so well, or some of these strategies like

166
00:10:16.639 --> 00:10:19.799
setting up fees for small orders and rush order premiums.

167
00:10:21.080 --> 00:10:23.840
The reason why it works so well is that these

168
00:10:23.840 --> 00:10:27.039
businesses sold on value. They didn't sell on price. No

169
00:10:27.039 --> 00:10:28.840
one was going to leave. No one was going to

170
00:10:28.919 --> 00:10:31.480
leave chocky. They're just not going to leave, you know,

171
00:10:31.519 --> 00:10:35.600
because the value was there. So another example is a

172
00:10:35.639 --> 00:10:39.600
professional services firm was billing hourly rates of two hundred dollars,

173
00:10:39.720 --> 00:10:42.960
thinking that they were making good money. But when they

174
00:10:43.080 --> 00:10:47.320
analyzed their true costs, they found out they had unbuilt

175
00:10:47.480 --> 00:10:52.559
client communications. Wow and yeah, and that can happen, you know,

176
00:10:53.360 --> 00:10:57.519
you just don't put it through the buildings. You have

177
00:10:56.480 --> 00:11:01.840
a fifteen to twenty thirty minute conversation with somebody and

178
00:11:01.879 --> 00:11:04.799
you don't put it through the billing system. Boom, it

179
00:11:04.840 --> 00:11:12.080
gets unbuilt. And there was They discovered that the proposal

180
00:11:12.159 --> 00:11:17.039
preparation time was a cost that they didn't consider. They

181
00:11:17.240 --> 00:11:21.879
also discovered that internal meetings and planning for each for

182
00:11:21.960 --> 00:11:25.960
certain clients weren't considered in the in the hourly rate,

183
00:11:27.879 --> 00:11:32.480
research and preparation for clients wasn't considered, which is really

184
00:11:32.840 --> 00:11:37.320
it's time. And so they were actually making less than

185
00:11:37.360 --> 00:11:41.000
one hundred dollars an hour. And then what they did

186
00:11:41.120 --> 00:11:46.360
is they implemented retainer based billing and project based pricing

187
00:11:46.960 --> 00:11:53.000
versus hourly and that they had different service packages so

188
00:11:53.039 --> 00:11:56.000
that their clients could have options, which is always a

189
00:11:56.039 --> 00:11:58.840
good idea. We've been talking about that on several of

190
00:11:58.879 --> 00:12:04.720
our shows regarding that tiered pricing, that bundling, bundling together

191
00:12:05.480 --> 00:12:11.559
services to give to give clients options. That's a real that.

192
00:12:11.679 --> 00:12:13.399
So we've been talking about that a lot. And that's

193
00:12:13.399 --> 00:12:18.639
what they did, and their revenue went up, but but

194
00:12:18.799 --> 00:12:22.679
more importantly, their profit doubled because they stopped leaking time

195
00:12:23.240 --> 00:12:29.360
and money. And the third example is a distribution company

196
00:12:29.399 --> 00:12:33.679
discovered that their biggest customer was actually their least profitable.

197
00:12:33.759 --> 00:12:37.639
This happens a lot, and here's what they found. They

198
00:12:37.679 --> 00:12:41.600
found that the special packaging requirements that that this big

199
00:12:41.639 --> 00:12:47.600
customer had was costing them more money. They discovered that

200
00:12:47.960 --> 00:12:52.080
the the delivery schedules that this that this big customer

201
00:12:52.120 --> 00:12:54.919
had was throwing off all the deliveries, stowing way out

202
00:12:54.919 --> 00:12:59.960
of whack and costing more money. They actually had access

203
00:13:00.080 --> 00:13:03.039
of return rates with this big customer that they didn't

204
00:13:03.080 --> 00:13:07.679
consider pricing in UH. They had payment terms that were

205
00:13:07.679 --> 00:13:10.720
too long for this customer that they didn't consider pricing

206
00:13:10.759 --> 00:13:15.799
in UH. They had storage costs UH not covered that

207
00:13:15.960 --> 00:13:19.759
were more that there was storage they as a special service.

208
00:13:19.799 --> 00:13:23.960
They stored additional inventory for this for this customer, and

209
00:13:24.399 --> 00:13:30.039
well it costs more. And so after realizing all this,

210
00:13:30.279 --> 00:13:36.639
they they started having packaging searcharges. They the delivery schedules

211
00:13:36.679 --> 00:13:40.240
were priced properly based on the rushing of the order. UH.

212
00:13:40.320 --> 00:13:43.559
Their return they had a return policy with fees.

213
00:13:44.519 --> 00:13:44.639
UH.

214
00:13:44.720 --> 00:13:48.159
They had payment term adjustments for that long term dating

215
00:13:48.279 --> 00:13:50.919
that that they were giving the customer, and they had

216
00:13:50.960 --> 00:13:55.480
storage fees for any of that long term UH storage

217
00:13:55.519 --> 00:14:00.320
that the customer requested. And once again, you know other

218
00:14:00.360 --> 00:14:02.679
people people might say, well that customer, you know, that

219
00:14:02.679 --> 00:14:06.679
customer probably left. They didn't, and they didn't because the

220
00:14:06.799 --> 00:14:10.879
company added so much value UH to the service that

221
00:14:10.919 --> 00:14:13.399
they offered that it was a it was a no

222
00:14:13.559 --> 00:14:17.159
brainer for that company to stay. And by making these

223
00:14:17.200 --> 00:14:23.440
adjustments UH, the UH distribution company increased profits by two

224
00:14:23.480 --> 00:14:28.480
hundred thousand while maintaining the relationship. And so here's how

225
00:14:28.519 --> 00:14:32.440
to find these revenue leaks in your business. Well, the

226
00:14:32.480 --> 00:14:34.840
first thing is you have to do a true cost analysis.

227
00:14:34.879 --> 00:14:39.120
You have to break down every cost component including all

228
00:14:39.200 --> 00:14:43.159
the time spent. You have to factor. In an overhead allocation,

229
00:14:43.840 --> 00:14:48.159
you have to consider opportunity costs. You have to account

230
00:14:48.159 --> 00:14:50.600
for risk factors. There are risk factors that don't happen

231
00:14:50.639 --> 00:14:53.840
every time, but could happen or happen occasionally, and you

232
00:14:53.919 --> 00:14:57.200
have to build that into the cost. And then you

233
00:14:57.279 --> 00:14:59.759
have to calculate the real margin. What is that real

234
00:14:59.799 --> 00:15:01.919
mar margin? What is what is the margin that you're

235
00:15:01.960 --> 00:15:06.519
actually making on that big customer, on that small customer. UH.

236
00:15:06.559 --> 00:15:09.960
Then you have to do a customer profitability analysis where

237
00:15:09.960 --> 00:15:13.000
you do UH you understand what the revenue is for

238
00:15:13.039 --> 00:15:17.360
the customer a per customer, the cost of service service

239
00:15:17.440 --> 00:15:21.320
each customer, any payment patterns that they might have, So

240
00:15:21.360 --> 00:15:25.200
certain customers take longer to pay. It doesn't mean you're

241
00:15:25.200 --> 00:15:27.360
gonna drop them like a hot potato. It just means

242
00:15:27.360 --> 00:15:29.639
that you're gonna You're gonna you have to build into

243
00:15:29.679 --> 00:15:37.360
that pricing. UH. Return rates they differ per customer, and

244
00:15:37.440 --> 00:15:41.759
the administrative burden differs depending upon who the customer is.

245
00:15:42.399 --> 00:15:45.919
So in addition to a cost an overall cost analysis,

246
00:15:46.200 --> 00:15:48.799
you have to look at each customer at least at

247
00:15:48.879 --> 00:15:51.759
least the top at least the top ten. You might

248
00:15:51.799 --> 00:15:53.480
not have to go real deep but you have to

249
00:15:53.519 --> 00:15:55.320
do you have to do the top ten, and then

250
00:15:55.360 --> 00:15:57.480
you have to do some small customers because you have

251
00:15:57.559 --> 00:16:00.120
to make sure that you're not getting burnt on anything

252
00:16:00.159 --> 00:16:06.440
that they're doing. And then you should have a product

253
00:16:07.159 --> 00:16:13.000
a product service line analysis by understanding the individual product margins,

254
00:16:13.559 --> 00:16:18.320
what does this product generate for gross profit versus another product,

255
00:16:20.240 --> 00:16:23.960
The setup and handling costs for each product that needs

256
00:16:24.000 --> 00:16:28.279
to be reviewed, the storage and carrying costs for each

257
00:16:28.440 --> 00:16:33.639
product needs to be reviewed, the support that needs to

258
00:16:33.679 --> 00:16:39.320
be reviewed for each product. So you've got your your

259
00:16:39.320 --> 00:16:43.600
true cost analysis, You've got your profitability analysis by customer,

260
00:16:43.679 --> 00:16:47.559
and then you have your profitability analysis by product line.

261
00:16:49.919 --> 00:16:54.320
And then you have to review your overall pricing structure

262
00:16:54.360 --> 00:16:58.480
for volume versus margin analysis, for minimum order requirements, for

263
00:16:58.600 --> 00:17:03.000
rush order policies and payment terms. And the key here

264
00:17:03.240 --> 00:17:07.319
is understanding that revenue doesn't necessarily equal profit. You have

265
00:17:07.400 --> 00:17:14.039
to understand what your product or service really costs. And

266
00:17:14.519 --> 00:17:19.759
you know, I had a client early on, it was

267
00:17:19.799 --> 00:17:24.680
back in nine or ten, and you know, they were

268
00:17:24.720 --> 00:17:31.079
really pleased with all of their pricing structures and so forth,

269
00:17:31.119 --> 00:17:34.799
and come to find and it's probably because customers were

270
00:17:34.799 --> 00:17:39.160
buying without complaining about price. Come to find out they

271
00:17:39.160 --> 00:17:42.440
were selling their product below cost. Yeah, you know when

272
00:17:42.440 --> 00:17:46.160
we did this type of an analysis, boy, I mean,

273
00:17:46.200 --> 00:17:48.160
and this company was losing two hundred and fifty thousand

274
00:17:48.200 --> 00:17:51.920
dollars a year and wondering why onlige on higher sales volumes. Well,

275
00:17:51.960 --> 00:17:54.160
the higher sales volumes were driven by the fact that

276
00:17:54.200 --> 00:18:00.079
there were priced really low because they were giving it away.

277
00:18:00.759 --> 00:18:06.240
So if you're not getting at least one third of

278
00:18:06.279 --> 00:18:10.799
your estimates or one third of your posals or offers,

279
00:18:11.440 --> 00:18:14.480
if you're not getting a no based on price for

280
00:18:14.680 --> 00:18:18.200
one third of your offers or proposals or estimates, then

281
00:18:18.240 --> 00:18:23.359
you are probably priced too low. Remarkablely get twenty percent

282
00:18:23.559 --> 00:18:27.680
or fifteen percent. This company was getting zero percent. And obviously,

283
00:18:28.799 --> 00:18:31.119
you know, we could figure out quickly why everybody was

284
00:18:31.200 --> 00:18:35.680
jumping on there on the price. And so that company,

285
00:18:35.720 --> 00:18:38.079
in addition to increasing their prices, how to add more

286
00:18:38.160 --> 00:18:43.119
value to the product. Because once again it's it's it's

287
00:18:43.160 --> 00:18:45.960
you want to compete based on value and not on price.

288
00:18:47.680 --> 00:18:50.079
So let me give you a simple way to start

289
00:18:50.160 --> 00:18:55.319
finding these leaks. So take your last ten orders or projects,

290
00:18:55.319 --> 00:18:58.079
doesn't matter if they're big or small, and ask did

291
00:18:58.119 --> 00:19:01.640
we make money? How much did we really make? What

292
00:19:01.680 --> 00:19:05.720
costs did we miss, what time didn't we build, what

293
00:19:05.920 --> 00:19:08.720
extras did we throw in? And would we do it

294
00:19:08.759 --> 00:19:12.960
again in that on that price? And most businesses will

295
00:19:13.000 --> 00:19:17.279
find that at least three of those ten were unprofitable.

296
00:19:18.279 --> 00:19:22.920
And that's your starting point for plugging revenue leaks, Jocky,

297
00:19:22.960 --> 00:19:24.039
Are there any questions?

298
00:19:25.799 --> 00:19:28.759
Yes, it's remarkable, Michael, and I think you really struck

299
00:19:28.799 --> 00:19:32.319
a chord with a number of these insights. So let's

300
00:19:33.319 --> 00:19:36.359
let's consolidate a couple of questions here into one. So, Michael,

301
00:19:36.400 --> 00:19:41.960
you mentioned revenue leaks in businesses. What's the most common

302
00:19:42.160 --> 00:19:45.559
revenue leak that you see? And what can business owners

303
00:19:45.640 --> 00:19:48.799
identify these kinds of leaks in their operations?

304
00:19:49.480 --> 00:19:52.319
Okay, great question. You know. The biggest revenue leak I

305
00:19:52.359 --> 00:19:56.759
see is is just misunderstanding what the true costs of

306
00:19:56.960 --> 00:20:01.839
small orders or projects Areusiness owners are all focused on

307
00:20:01.880 --> 00:20:04.519
those big projects making sure A they get out the

308
00:20:04.559 --> 00:20:09.039
door and B you know that that customer is happy

309
00:20:10.839 --> 00:20:13.799
that they lose sight of the smaller orders, which can

310
00:20:13.839 --> 00:20:18.279
represent anywhere between thirty and sixty or seventy percent of

311
00:20:18.279 --> 00:20:22.160
their revenue and they don't know what those products cost.

312
00:20:22.240 --> 00:20:25.680
Businesses often think they're making money on every sale, but

313
00:20:25.759 --> 00:20:29.319
they're not factoring things like the setup time, the administrative cost,

314
00:20:29.359 --> 00:20:32.279
the overhead allocation. And the fastest way to find this

315
00:20:32.400 --> 00:20:35.400
leak is to analyze your last ten orders as I

316
00:20:35.519 --> 00:20:37.279
as I mentioned right at the end of that segment

317
00:20:37.839 --> 00:20:42.599
and breaking down every cost including time spent, materials, overhead

318
00:20:42.640 --> 00:20:46.720
and administrative costs and what most most business most businesses

319
00:20:46.759 --> 00:20:49.400
discovered that at least thirty percent of their orders are

320
00:20:49.519 --> 00:20:53.880
actually losing money. And so if you go through that

321
00:20:54.000 --> 00:20:57.720
list that I just went went over, you'll be able

322
00:20:57.759 --> 00:21:00.799
to identify where the leaks are.

323
00:21:02.160 --> 00:21:05.119
It's really interesting, right, Michael, And I imagine that checklist

324
00:21:05.599 --> 00:21:08.519
would be applicable across multiple industries.

325
00:21:08.559 --> 00:21:10.440
Correct, that's absolutely true.

326
00:21:10.599 --> 00:21:13.400
Yes, great, So, as you know, we have an audience

327
00:21:13.480 --> 00:21:16.200
of business owners and executives that listen to US coast

328
00:21:16.240 --> 00:21:20.920
to coast, representing multiple industries. Here's another question. Now, you

329
00:21:21.000 --> 00:21:26.640
talked about a manufacturing company implementing a tiered pricing system.

330
00:21:27.200 --> 00:21:30.720
Right now for businesses though that are a little bit concerned,

331
00:21:30.720 --> 00:21:34.119
a little bit nervous, Michael, about losing customers with these

332
00:21:34.119 --> 00:21:38.839
sort of price changes. What do you recommend rolling out

333
00:21:38.839 --> 00:21:39.960
this kind of an initiative.

334
00:21:40.640 --> 00:21:43.400
Well, we come back to value again. You know, you're

335
00:21:43.440 --> 00:21:48.240
stop by segment segmenting your customers. You analyze profitability per customer,

336
00:21:48.319 --> 00:21:52.720
identify which ones are actually costing you money, and then

337
00:21:52.799 --> 00:21:56.200
create those pricing tiers that protect your profits while giving

338
00:21:56.240 --> 00:22:00.359
customers choices because customers want options, but they the key

339
00:22:00.480 --> 00:22:04.240
is to communicate the changes as adding value, not just

340
00:22:04.359 --> 00:22:08.160
raising prices. Too many times those little letters go out

341
00:22:08.200 --> 00:22:11.640
to customers that say, we because of the increased cost

342
00:22:11.680 --> 00:22:14.880
of this of this material, or because of the increased

343
00:22:14.880 --> 00:22:17.839
cost of labor, or because of the increase or because

344
00:22:18.279 --> 00:22:21.519
like right now it's popular to say because inflation is

345
00:22:21.599 --> 00:22:25.359
hitting all of us. Yeah, you know, but really what

346
00:22:25.519 --> 00:22:30.359
the communication should be is we're you know, we are

347
00:22:30.440 --> 00:22:32.799
having a price increase, but it's because we're adding this

348
00:22:33.000 --> 00:22:39.200
value to the product or service. That way you'll you'll

349
00:22:39.200 --> 00:22:42.839
maintain you'll retain a large percentage of your customers. That

350
00:22:42.920 --> 00:22:46.240
manufacturing company actually retained ninety five percent of their customers

351
00:22:46.599 --> 00:22:51.240
because they offer options and they communicated the price increase

352
00:22:52.400 --> 00:22:57.400
with value add not justiflaming it on the inflation that

353
00:22:57.440 --> 00:23:04.440
we're all experiencing exactly. Yes, so that important really taking

354
00:23:04.480 --> 00:23:08.839
ship K. Thank you, and so before I continued this discussion,

355
00:23:08.839 --> 00:23:12.079
we're going to take a ninety second break. Hey, their

356
00:23:12.119 --> 00:23:14.759
business owners, let me ask you something. Are you tied

357
00:23:14.839 --> 00:23:18.680
of blending in with your competitors, frustrated with slow growth

358
00:23:18.759 --> 00:23:22.480
and slim margins? Well, I've got news for you. Everything

359
00:23:22.519 --> 00:23:27.079
you've ever learned about growing your business is wrong. Don't worry.

360
00:23:27.599 --> 00:23:29.519
I'm here to let you in on a secret weapon,

361
00:23:30.000 --> 00:23:33.519
your position of market dominance. It's what sets you apart,

362
00:23:33.680 --> 00:23:37.440
makes you irreplaceable, and has customers lining up at your door.

363
00:23:38.480 --> 00:23:42.079
My name is Michael Barbarrita from Next Step CFO. I

364
00:23:42.240 --> 00:23:45.359
know what you're thinking. Sounds great, Michael, How do I

365
00:23:45.519 --> 00:23:49.240
find my position of market dominance? Well, that's exactly why

366
00:23:49.279 --> 00:23:53.160
we've created our game changing impleitation program called Next Step

367
00:23:53.279 --> 00:23:56.480
to Market Dominance. In just ninety days, we'll guide you

368
00:23:56.559 --> 00:23:59.279
step by step to a position of market dominance by

369
00:23:59.400 --> 00:24:03.319
uncovering your unique strengths that competitors can't touch. By crafting

370
00:24:03.359 --> 00:24:06.720
a message that resonates deeply with your ideal customer, by

371
00:24:06.799 --> 00:24:09.319
building a strategy that turns you into the go to

372
00:24:09.559 --> 00:24:13.079
expert in your field. Now this is in theory. These

373
00:24:13.160 --> 00:24:15.799
are battle tests and strategies that have helped businesses like

374
00:24:15.880 --> 00:24:20.319
you as double, triple and quadruple their revenue. Don't let

375
00:24:20.400 --> 00:24:23.480
another quarter go by struggling to standout. It's time to

376
00:24:23.680 --> 00:24:28.880
dominate your market. Period. Go to NEXTSTEPCFO dot net forward

377
00:24:28.920 --> 00:24:32.359
slash contact. Fill out the form and in the message

378
00:24:32.359 --> 00:24:36.400
section put the word dominate or call us at seven

379
00:24:36.440 --> 00:24:40.039
eight one three two six three A two two. That's

380
00:24:40.160 --> 00:24:44.000
next STEPCFO dot net forward slash contact or call us

381
00:24:44.160 --> 00:24:47.599
at seven eight one three two six three A two two.

382
00:24:49.960 --> 00:24:54.000
Welcome back. And you know the second major area for

383
00:24:54.160 --> 00:24:58.319
hidden profits is what I call cost structure transformation. And

384
00:24:58.400 --> 00:25:04.039
this isn't just about it's about restructuring them to protect

385
00:25:04.359 --> 00:25:07.000
and enhance your profits. So I'm going to be giving

386
00:25:07.039 --> 00:25:12.160
you some examples here, and there's really some creative ways

387
00:25:12.559 --> 00:25:18.960
that costs have been reduced, and probably about half of

388
00:25:19.039 --> 00:25:23.039
them I've had some personal experience with the others, I've

389
00:25:23.119 --> 00:25:28.400
just recognized other businesses doing it. So let me share

390
00:25:28.440 --> 00:25:31.880
an example in the construction for a construction company that

391
00:25:32.559 --> 00:25:36.559
transformed their entire cost structure. They had the traditional costs,

392
00:25:36.640 --> 00:25:38.960
they had office space, they had a full time staff,

393
00:25:38.960 --> 00:25:41.559
they had equipment leases, they had a fleet of vehicles,

394
00:25:42.680 --> 00:25:47.240
they had software licenses, insurance, the whole smash. And when

395
00:25:47.279 --> 00:25:50.119
business was good, these costs were very manageable. But during

396
00:25:50.240 --> 00:25:54.519
slow periods they ate away profits. And here's what they did.

397
00:25:55.640 --> 00:26:01.519
So with the equipment, they sold their own whipment and

398
00:26:01.640 --> 00:26:06.319
they created equipment and equipment sharing network. This is very creative.

399
00:26:06.720 --> 00:26:08.920
I was involved in one of these and it was

400
00:26:09.440 --> 00:26:15.960
really incredibly effective. And what it did, in my experience,

401
00:26:16.200 --> 00:26:20.279
is it not only saved equipment costs, but it also

402
00:26:21.759 --> 00:26:26.319
allowed a company my client, to be in a different

403
00:26:26.759 --> 00:26:29.119
product segment. And it was so back. It was the

404
00:26:29.240 --> 00:26:34.279
insallation business. Once again, they couldn't offer home insallation because

405
00:26:34.319 --> 00:26:36.359
they could didn't have the money to buy the equipment,

406
00:26:37.359 --> 00:26:40.720
So they created an equipment sharing network. And what this

407
00:26:40.880 --> 00:26:44.039
construction company did is that created a network with five

408
00:26:44.119 --> 00:26:48.599
other local contractors who had complementary work schedules. And when

409
00:26:48.680 --> 00:26:53.359
Company A had a back ho sitting idle Monday through Wednesday,

410
00:26:53.759 --> 00:26:57.720
Company B used it for their project. And when Company

411
00:26:57.799 --> 00:27:01.359
b cement mixer wasn't being used Thursday and Friday, Company

412
00:27:01.440 --> 00:27:05.279
A prod uce it and so they created a scheduling

413
00:27:05.400 --> 00:27:10.920
system and a profit sharing agreement where who owned the

414
00:27:11.000 --> 00:27:14.240
equipment gets seventy percent of the rental fee, the company

415
00:27:14.279 --> 00:27:17.759
that dealt with the scheduling of all this equipment got

416
00:27:17.880 --> 00:27:24.039
thirty percent. All the maintenance costs were shared proportionally to usage,

417
00:27:25.119 --> 00:27:28.759
and then the insurance and liability insurance was once again

418
00:27:29.079 --> 00:27:34.680
proportionally to usage. It was clearly defined. And through this

419
00:27:34.960 --> 00:27:37.839
they also, you know, a couple of the companies created

420
00:27:38.519 --> 00:27:44.799
rental equipment rental income. It was and then with the

421
00:27:44.880 --> 00:27:47.640
experience that I was in, not only did it create

422
00:27:48.720 --> 00:27:51.440
a great opportunity, it was a win win for both sides,

423
00:27:52.359 --> 00:27:57.039
but like I said, it put that insulation company into

424
00:27:57.160 --> 00:28:03.440
the foam insulation business, which is a pretty substantial ended

425
00:28:03.480 --> 00:28:05.759
up being like thirty or forty percent of their total

426
00:28:05.839 --> 00:28:09.039
revenue once they got into full swing and did this

427
00:28:09.200 --> 00:28:17.640
equipment sharing. So there were tremendous opportunities with equipment sharing.

428
00:28:18.279 --> 00:28:21.519
Another thing that a couple of companies have done, and

429
00:28:21.640 --> 00:28:23.680
I've been involved in this as well to a degree

430
00:28:24.720 --> 00:28:29.440
where they actually implemented what they called usage based rental,

431
00:28:29.559 --> 00:28:32.039
So instead of leasing a crane for ten thousand a month,

432
00:28:32.119 --> 00:28:36.359
regardless of how often they use it. They actually negotiated

433
00:28:36.400 --> 00:28:38.839
a special deal where they were only paying when the

434
00:28:38.920 --> 00:28:43.839
equipment was actually operating, and they had a four hour minimum.

435
00:28:44.000 --> 00:28:47.720
They did, but if they used the equipment for four

436
00:28:47.799 --> 00:28:52.799
hours or more, it was never a wasted cost. And

437
00:28:53.599 --> 00:28:56.799
all of this transformed a fixed one hundred and twenty

438
00:28:56.839 --> 00:29:01.880
thousand dollars annual fixed cost into a variable cost of

439
00:29:02.039 --> 00:29:07.200
forty five thousand because they only paid when generating revenue

440
00:29:07.440 --> 00:29:14.000
from the equipment. So that for the companies that are

441
00:29:14.000 --> 00:29:18.119
in the trades, if you can look to make these arrangements,

442
00:29:18.200 --> 00:29:22.319
they are incredibly valuable. And like I said, also keep

443
00:29:22.400 --> 00:29:25.960
in mind, if there's a segment of your business that

444
00:29:26.079 --> 00:29:29.440
you're not taking advantage of because you can't afford equipment,

445
00:29:30.599 --> 00:29:33.920
you can find companies. They might not even be in

446
00:29:33.960 --> 00:29:37.799
the same industry. They probably aren't, but you can find

447
00:29:37.880 --> 00:29:41.240
companies to share equipment with. And like I said, I've

448
00:29:41.279 --> 00:29:43.519
been involved in one of those and it was just

449
00:29:43.799 --> 00:29:50.640
it was just incredibly valuable and incredibly profitable. And then

450
00:29:51.480 --> 00:29:56.680
you have to look at the staffing structure when you're

451
00:29:57.799 --> 00:30:03.759
looking at this cost transformation that I'm talking about. So uh,

452
00:30:04.279 --> 00:30:09.680
the uh the construction company at their core team, uh,

453
00:30:09.759 --> 00:30:14.680
the essential project manages, the estimators, the key supervisors. But

454
00:30:14.880 --> 00:30:17.960
then they had a specialized contract in network where they

455
00:30:18.039 --> 00:30:22.359
built relationships with reliable contractors to do specialized work. Some

456
00:30:22.599 --> 00:30:28.599
companies in this construction industry have contractors subcontractors for everything

457
00:30:29.000 --> 00:30:35.440
and chooky, remember a co Yes, this is the opha outsource. Interesting,

458
00:30:36.240 --> 00:30:38.960
that's what this and that's what this uh, this company

459
00:30:39.400 --> 00:30:43.279
did uh and they actually outsourced everything including the framing,

460
00:30:44.799 --> 00:30:48.079
and it was it was really productive because they were

461
00:30:48.160 --> 00:30:51.559
having people they were actually having trouble hiring people in

462
00:30:51.680 --> 00:30:56.039
this skilled area. Uh. They had their project managers in place,

463
00:30:56.119 --> 00:31:01.480
they had their estimators and there you know call leads,

464
00:31:01.759 --> 00:31:05.759
some people call a step down from project management a

465
00:31:05.880 --> 00:31:11.079
lead on the job. And it worked out incredibly well.

466
00:31:12.559 --> 00:31:15.640
And you know, they didn't have to worry about all

467
00:31:15.759 --> 00:31:21.720
of the various different parts of the of a job.

468
00:31:22.839 --> 00:31:27.200
They had specialists in everything because they outsourced it. And

469
00:31:27.279 --> 00:31:29.960
then to worry about scrambling finding people or they didn't

470
00:31:29.960 --> 00:31:33.400
have to worry about the skill set because they hired

471
00:31:33.599 --> 00:31:35.640
you know, these outsourced companies that did this stuff for

472
00:31:35.720 --> 00:31:41.359
a living. So and then here's another one that this

473
00:31:41.480 --> 00:31:44.599
one's much more difficult. It's called project based hiring, and

474
00:31:45.359 --> 00:31:47.720
what this construction company did they were able to hire

475
00:31:47.759 --> 00:31:52.359
additional labor only when projects requirement required it. Now, this

476
00:31:52.559 --> 00:31:56.160
is definitely more difficult than outsourcing due to the availability

477
00:31:56.200 --> 00:31:59.279
of workers. But if you actually look for these type

478
00:31:59.279 --> 00:32:03.200
of temporary workers when you don't need them, you'll have

479
00:32:03.359 --> 00:32:07.920
them when you do because they're temporary and they work

480
00:32:07.960 --> 00:32:15.160
on flexible hours. They also had skilled sharing agreements with

481
00:32:15.319 --> 00:32:19.839
other companies where they shared skilled workers including admin workers,

482
00:32:20.799 --> 00:32:25.440
bookkeepers and so forth were shared, which was interesting. They

483
00:32:25.519 --> 00:32:29.720
actually had cross training programs where they would they take

484
00:32:29.799 --> 00:32:32.680
those core members and they would train them in different

485
00:32:32.759 --> 00:32:37.960
areas in case they couldn't get help, interesting as well.

486
00:32:38.279 --> 00:32:41.039
And then they had a facility cost strategy where they

487
00:32:41.160 --> 00:32:45.240
downsized their main office, reducing their fixed office space by

488
00:32:45.319 --> 00:32:50.119
sixty percent. They created satellite like locations, which was small

489
00:32:50.240 --> 00:32:53.480
job site offices instead of one large facility. That was helpful.

490
00:32:56.200 --> 00:33:00.559
They used they had storage optimization where they can solidated

491
00:33:00.599 --> 00:33:05.400
this storage and implemented just in time delivery. Yeah, that

492
00:33:05.519 --> 00:33:07.880
was great. And they had mobile office solutions where they

493
00:33:07.920 --> 00:33:12.920
equipped teams with technology for remote work and so they

494
00:33:13.799 --> 00:33:18.519
they really they converted most of their costs into variable costs,

495
00:33:18.519 --> 00:33:22.160
which is exactly what you want to do and from

496
00:33:22.240 --> 00:33:26.000
a fixed cost and it allowed for better matching of

497
00:33:26.079 --> 00:33:31.720
revenue and expenses. And overall their fixed costs dropped by

498
00:33:31.799 --> 00:33:35.960
forty percent, which was incredible, And so there were Another

499
00:33:36.079 --> 00:33:41.359
example was a marketing agency that transformed their cost structure

500
00:33:41.519 --> 00:33:46.359
because before they were using full time special marketing agents

501
00:33:46.400 --> 00:33:51.039
and specialists. They had a long term office lease, they

502
00:33:51.160 --> 00:33:54.480
had fixed software costs for all the software that they

503
00:33:54.559 --> 00:33:59.680
needed to do the marketing for clients. They had standard

504
00:33:59.720 --> 00:34:03.960
benefits all fixed. They had you know a bunch of

505
00:34:04.039 --> 00:34:12.440
general fixed overhead as well. But afterwards they transformed the

506
00:34:12.559 --> 00:34:17.559
marketing agency by number one core team what they called

507
00:34:17.800 --> 00:34:21.679
core team plus network, so they kept only their essential

508
00:34:21.760 --> 00:34:25.800
roles in house. Very similar to the construction company. They

509
00:34:25.920 --> 00:34:29.760
actually built a network of pre vetted freelancers. Once again

510
00:34:29.920 --> 00:34:35.760
that opa outsource. They built a network of pre vetted freelancers,

511
00:34:35.800 --> 00:34:38.280
so they did their work beforehand. As I mentioned earlier,

512
00:34:38.679 --> 00:34:41.039
you do you the work when you don't. You find

513
00:34:41.119 --> 00:34:44.639
these people when you don't need them. And because they're freelancers,

514
00:34:45.159 --> 00:34:49.880
they're able to basically for the most part, react on

515
00:34:49.960 --> 00:34:57.480
demand and they actually ended up saving forty on their payroll.

516
00:34:58.480 --> 00:35:00.719
Then they had the marketing company also had a virtual

517
00:35:00.840 --> 00:35:05.320
first approach where they eliminated permanent office staff and everybody virtually.

518
00:35:05.599 --> 00:35:08.639
That worked very well. Uh. They invested in all these

519
00:35:08.719 --> 00:35:12.440
collaboration tools so that the communication would stay, you know,

520
00:35:12.599 --> 00:35:19.840
like slack. Uh. They set up cloud based file management

521
00:35:19.920 --> 00:35:23.920
to store the files, you know, shared files. They reduced

522
00:35:24.000 --> 00:35:26.719
overhead by sixty five percent as a result of that.

523
00:35:29.239 --> 00:35:34.400
And they also had flexible benefits where they offered benefits

524
00:35:34.480 --> 00:35:38.119
benefits allowance instead of fixed packages. So they let employees

525
00:35:38.199 --> 00:35:44.079
choose their benefit mix. And then they provided health insurance stipends,

526
00:35:45.280 --> 00:35:51.719
which is some companies now uh get insurance that doesn't

527
00:35:51.760 --> 00:35:56.039
have it deductible. And what they do is because they

528
00:35:56.119 --> 00:35:57.960
have a young staff, and if they have a young

529
00:35:58.039 --> 00:36:04.000
staff that that that's pretty healthy, they choose a deductible

530
00:36:04.039 --> 00:36:10.199
that they pay the employee through a health benefit system.

531
00:36:10.639 --> 00:36:17.239
They pay the employee that deductible and so that no

532
00:36:17.400 --> 00:36:21.760
deductible insurance comes through at a nice low rate, and

533
00:36:21.840 --> 00:36:25.360
then they pay the deductibles. And what ended up happening

534
00:36:25.480 --> 00:36:28.400
is that only half the people use their full deductible.

535
00:36:29.199 --> 00:36:32.519
So what ended up happening is overall, they saved on

536
00:36:32.639 --> 00:36:36.559
insurance because the deductibles were not a big deal. They

537
00:36:36.639 --> 00:36:39.000
had a relatively healthy crew or young crew, I should

538
00:36:39.000 --> 00:36:41.800
say relatively healthy but young, and so a lot of

539
00:36:41.840 --> 00:36:44.159
the people didn't go through the deductibles and they didn't

540
00:36:44.199 --> 00:36:47.239
have to ask for them. They ended up producing their

541
00:36:47.280 --> 00:36:49.519
benefit costs by thirty percent as a result of that.

542
00:36:53.400 --> 00:36:58.800
Then they had their variable costs, of course, were tied

543
00:36:58.840 --> 00:37:03.760
directly to revenue generation activities, and they implemented profit sharing,

544
00:37:03.920 --> 00:37:08.480
which was a variable cost based on profit versus fixed bonuses.

545
00:37:09.320 --> 00:37:12.000
A lot of people recently have given Christmas bonuses and

546
00:37:12.039 --> 00:37:18.960
those types of things which people come to expect. But

547
00:37:19.719 --> 00:37:22.880
when you have a profit sharing bonus, that that bonus

548
00:37:23.000 --> 00:37:29.639
is variable based on profit. And so this company, the

549
00:37:29.719 --> 00:37:32.519
marketing company, their profit markets increased from to fifteen to

550
00:37:32.599 --> 00:37:36.599
thirty five percent, while employee satisfaction improved because of that

551
00:37:36.840 --> 00:37:42.199
increased flexibility. And so here's how you really analyze your

552
00:37:42.239 --> 00:37:45.960
cost structures first, and this is what I'm going to

553
00:37:46.039 --> 00:37:48.199
go through here is quite lengthy, but so I'm going

554
00:37:48.280 --> 00:37:51.639
to shorten it with just talking about a couple of

555
00:37:51.800 --> 00:37:54.639
costs in each category. So number one is your fixed

556
00:37:54.679 --> 00:37:56.719
cost analysis. You have to look at your rent and

557
00:37:56.800 --> 00:38:02.159
mortgage payments, your permanent staffing salaries, your equipment leases, and

558
00:38:02.239 --> 00:38:06.679
your software licenses, your utility bills. Then you have to

559
00:38:06.840 --> 00:38:10.119
understand what your utilization rates are. This is equipment usage

560
00:38:10.280 --> 00:38:14.679
hours versus total hours, staff billing hours versus total hours,

561
00:38:14.760 --> 00:38:21.320
facility space storage usage versus total space usage. And then

562
00:38:21.440 --> 00:38:24.719
you have to identify peak and slow periods. Keep that

563
00:38:24.880 --> 00:38:29.000
in mind. You have to map resource allocation. You have

564
00:38:29.119 --> 00:38:33.119
to track capacity usage. You have to measure efficiency. You

565
00:38:33.239 --> 00:38:35.639
have to do a lease in buy analysis to make

566
00:38:35.719 --> 00:38:40.079
sure that the equipment that comes in is most efficient,

567
00:38:40.159 --> 00:38:43.559
whether it's leased or whether it's bought. You have to

568
00:38:43.639 --> 00:38:47.159
review your staff structure and see what opportunities you could

569
00:38:47.199 --> 00:38:55.119
get flexible. You know those remote those subcontractors and those

570
00:38:56.199 --> 00:39:01.000
outsourced companies or outsourced businesses that can come at a

571
00:39:01.039 --> 00:39:05.199
moment's notice. And then you have a technology assessment, a

572
00:39:05.360 --> 00:39:11.880
facility evaluation, equipment usage study, and a partnership potential like

573
00:39:12.280 --> 00:39:17.440
that shared equipment network partnership. So the key is moving

574
00:39:17.480 --> 00:39:20.360
from a fix to a variable cost structure whenever possible,

575
00:39:20.480 --> 00:39:25.639
but doing it strategically to maintain quality and reliability took

576
00:39:25.639 --> 00:39:27.880
me any questions from the audience.

577
00:39:27.880 --> 00:39:31.239
Absolutely, So it's really interesting, right, Michael, I mean just

578
00:39:31.320 --> 00:39:34.760
this point about fixed costs and variable costs. So let's

579
00:39:34.960 --> 00:39:39.760
get into it. When transforming fixed costs to variable costs,

580
00:39:39.960 --> 00:39:42.239
what's the first step of business owners should take.

581
00:39:43.280 --> 00:39:45.880
Well, start's with that full audit of all the fixed

582
00:39:45.920 --> 00:39:48.880
costs and the utilization rates that little list that I

583
00:39:49.199 --> 00:39:53.719
just went down. But really, if they started with just

584
00:39:54.039 --> 00:39:57.000
the fixed costs, they're going to be way ahead of

585
00:39:57.039 --> 00:39:59.840
the game. Because if you're paying five thousand monthly for

586
00:40:00.000 --> 00:40:02.400
equipment but you're only using it forty percent of the time,

587
00:40:02.480 --> 00:40:06.519
that's your first opportunity. You map out the exact use

588
00:40:06.840 --> 00:40:11.800
usage patterns of all of your assets, and this gives

589
00:40:11.800 --> 00:40:14.840
you the data to negotiate better terms with vendors on

590
00:40:14.960 --> 00:40:19.480
those assets. Consider that equipment sharing strategy that I mentioned earlier,

591
00:40:21.000 --> 00:40:24.360
or usage based pricing that I mentioned earlier, where the

592
00:40:24.440 --> 00:40:26.960
company that had that ten thousand dollars a month lease

593
00:40:27.079 --> 00:40:30.239
converted it to usage based and saved like thirty or

594
00:40:30.280 --> 00:40:35.760
forty percent, And so yeah, you could. So's there's a

595
00:40:35.840 --> 00:40:38.639
lot of options if you really can focus on it.

596
00:40:38.880 --> 00:40:43.039
There's a lot of ways to save and cut those costs. Michael.

597
00:40:43.039 --> 00:40:44.719
As you know a lot of small business owners, they

598
00:40:44.760 --> 00:40:47.039
get a little nervous where we talk numbers, right, I

599
00:40:47.119 --> 00:40:51.199
mean it's sure they do. Yeah, what you've just shared

600
00:40:51.199 --> 00:40:54.880
this piece of insight. That first step usually is the

601
00:40:54.920 --> 00:40:57.159
most difficult steps. So the fact that you've given them

602
00:40:57.199 --> 00:40:59.760
some insight and just taken that first step really important.

603
00:41:00.400 --> 00:41:03.599
Another related question on this a slightly different topics something

604
00:41:03.599 --> 00:41:04.480
that you mentioned earlier.

605
00:41:04.559 --> 00:41:06.760
So when you mentioned.

606
00:41:06.599 --> 00:41:13.119
Contractor partnerships as a way to reduce fixed costs, structure

607
00:41:13.159 --> 00:41:16.639
these partnerships, especially for quality and reliability.

608
00:41:16.719 --> 00:41:20.199
Michael, Well, you know, the key is is formal agreements

609
00:41:20.239 --> 00:41:25.119
with absolutely clear terms, not handshakes that that that that

610
00:41:25.239 --> 00:41:29.840
doesn't work. What happens is the handshake deals get get muddled.

611
00:41:30.960 --> 00:41:34.880
So start by identifying complementary businesses where you can share

612
00:41:34.960 --> 00:41:38.440
resources and create written agreements. That's what we had when

613
00:41:38.480 --> 00:41:41.199
we when we did it and when I was helping

614
00:41:41.280 --> 00:41:45.079
my client. That specify the revenue sharing because there's all

615
00:41:45.199 --> 00:41:50.320
kinds of revenue sharing with the rental income and so forth,

616
00:41:51.159 --> 00:41:56.480
the quality standards that each wants and needs from that equipment,

617
00:41:56.559 --> 00:42:01.159
the response times any dispute resolution, and figure out how

618
00:42:01.280 --> 00:42:03.159
those will be handled, at least the ones that you

619
00:42:03.280 --> 00:42:08.920
can anticipate you're building performance metrics and regular reviews. One

620
00:42:09.000 --> 00:42:13.239
construction company created a network of those five partners, reducing

621
00:42:13.280 --> 00:42:16.280
those fixed hosts by forty percent while increasing capacity by

622
00:42:16.360 --> 00:42:19.880
sixty percent. So there's there's all types of opportunity there.

623
00:42:23.119 --> 00:42:27.800
And thank you for that, Chooky. And So before I

624
00:42:27.880 --> 00:42:31.679
continue this discussion, we're going to take a ninety second break. Hey,

625
00:42:31.719 --> 00:42:34.199
their business owners, let me ask you something. Are you

626
00:42:34.360 --> 00:42:38.079
tied of blending in with your competitors? Frustrated with slow

627
00:42:38.159 --> 00:42:42.320
growth and slim margins. I've got news for you. Everything

628
00:42:42.360 --> 00:42:46.920
you've ever learned about growing your business is wrong. Don't worry.

629
00:42:47.440 --> 00:42:49.320
I'm here to let you in on a secret weapon,

630
00:42:49.800 --> 00:42:53.320
your position of market dominance. It's what sets you apart,

631
00:42:53.519 --> 00:42:57.280
makes you irreplaceable, and has customers lining up at your door.

632
00:42:58.320 --> 00:43:02.119
My name is Michael Barbarita from step CFO. I know

633
00:43:02.199 --> 00:43:05.599
what you're thinking. Sounds great, Michael, How do I find

634
00:43:05.639 --> 00:43:09.280
my position of market dominance? Well, that's exactly why we've

635
00:43:09.320 --> 00:43:13.119
created our game changing impleitation program called Next Step to

636
00:43:13.239 --> 00:43:16.639
Market Dominance. In just ninety days, we'll guide you step

637
00:43:16.679 --> 00:43:19.679
by step to a position of market dominance by uncovering

638
00:43:19.719 --> 00:43:23.239
your unique strengths that competitors can't touch. By crafting a

639
00:43:23.320 --> 00:43:26.960
message that resonates deeply with your ideal customer. By building

640
00:43:27.039 --> 00:43:29.719
a strategy that turns you into the go to expert

641
00:43:29.800 --> 00:43:33.079
in your field. Now this is in theory. These are

642
00:43:33.239 --> 00:43:36.400
battle tested strategies that have helped businesses like you as double,

643
00:43:36.519 --> 00:43:41.000
triple and quadruple their revenue. Don't let another quarter go

644
00:43:41.119 --> 00:43:45.599
by struggling to standout. It's time to dominate your market period.

645
00:43:46.320 --> 00:43:50.559
Go to NEXTSTEPCFO dot net forward slash contact. Fill out

646
00:43:50.599 --> 00:43:53.440
the form and in the message section put the word

647
00:43:53.920 --> 00:43:57.519
dominate or call us at seven eighty one three two

648
00:43:57.719 --> 00:44:01.559
six three eight two two. That's NeXTSTEP CFO dot net

649
00:44:01.719 --> 00:44:04.880
forward slash contact or call us at seven eight one

650
00:44:05.360 --> 00:44:09.960
three two six three eight two two. Well, welcome back,

651
00:44:10.159 --> 00:44:14.679
and you know time flies when you're having fun, So Jickie,

652
00:44:14.719 --> 00:44:16.960
if you could go, we are running a short of

653
00:44:17.039 --> 00:44:19.280
time today, so if you could go over compliments, then

654
00:44:20.360 --> 00:44:22.960
send it back to me and i'll I'll close with

655
00:44:23.360 --> 00:44:25.280
a quick tap.

656
00:44:25.840 --> 00:44:28.840
This is a business complements segments and we have four

657
00:44:28.920 --> 00:44:31.239
business owners that we would like to complement and really

658
00:44:31.280 --> 00:44:34.000
spotlight today. These are business owners that are coast to

659
00:44:34.079 --> 00:44:37.400
coast in their operations. So the first is Alan McGriff.

660
00:44:37.480 --> 00:44:42.079
He's the owner of H and H Fencing and Landscape Solutions.

661
00:44:42.079 --> 00:44:44.960
They're based in Colorado and Michael get this. This company

662
00:44:45.039 --> 00:44:48.719
is a go to resource for fence construction, fence repair,

663
00:44:49.559 --> 00:44:54.400
or any custom jobs. And as a veteran founded company,

664
00:44:55.159 --> 00:44:59.719
they operate with strong values aimed at understanding and truly

665
00:44:59.800 --> 00:45:03.199
so in clients and it's just really interesting. They approach

666
00:45:03.360 --> 00:45:07.360
their projects like the opportunity to build a long term relationship.

667
00:45:07.760 --> 00:45:09.880
So you can check out a little bit more about

668
00:45:10.119 --> 00:45:15.559
H and H Fencing at H andhdash fencing dot com.

669
00:45:15.800 --> 00:45:20.760
The next business owner is Bill Doval and he is

670
00:45:20.840 --> 00:45:25.519
with PROEFT Center based on Idaho and just really remarkable Michael.

671
00:45:25.559 --> 00:45:29.800
Bill is a master practitioner of EFT, which is Emotional

672
00:45:29.960 --> 00:45:33.920
freedom technique and he's got a background in registered nursing.

673
00:45:34.400 --> 00:45:37.920
And here's a part of Bill's mission statement. It's also

674
00:45:38.239 --> 00:45:41.920
really a service commitment to empower people to update their

675
00:45:42.000 --> 00:45:47.360
internal software so they can have the thoughts, emotions, reactions

676
00:45:47.400 --> 00:45:51.079
and body sensations that they want. Wow, you can really

677
00:45:51.559 --> 00:45:54.480
find out a little bit more about Bill's perspectives on

678
00:45:55.559 --> 00:45:59.639
his web side proeftcenter dot com. The next business owners

679
00:45:59.840 --> 00:46:03.559
Justia Olma. She is the founder of Scribe Syndicates and

680
00:46:03.760 --> 00:46:09.719
she serves business owners and marketing professionals really nationwide. And Michael,

681
00:46:09.719 --> 00:46:12.599
you might sort of be inspired by this. So they

682
00:46:12.639 --> 00:46:16.480
effectively write copy right, So they write marketing copy that

683
00:46:16.599 --> 00:46:21.159
aligns with a company's mission, goals and target audiences. In fact,

684
00:46:21.440 --> 00:46:23.960
also part of a company's profit strategy plan. They would

685
00:46:23.960 --> 00:46:26.920
write some marketing copy for that, and they incorporate really

686
00:46:26.960 --> 00:46:31.079
important keywords and key terms and phrases to really connect

687
00:46:31.159 --> 00:46:35.079
with clients. You can learn more about Jessica Olma on

688
00:46:35.440 --> 00:46:38.159
her LinkedIn profile. And then the last business owner of

689
00:46:38.199 --> 00:46:43.719
Spotlight is Annie Young. Annie is with Sawabona Ranch and

690
00:46:43.920 --> 00:46:48.079
they serve people really across the country and world. She

691
00:46:48.400 --> 00:46:55.159
is an equine assisted mental health practitioner, certified and licensed.

692
00:46:55.760 --> 00:46:59.599
And here's her mission statement, Michael, to help parents rediscover

693
00:46:59.719 --> 00:47:03.760
their passions, to heal their pain from the past, to

694
00:47:03.920 --> 00:47:08.639
embrace their strength, and to see their gifts come to life.

695
00:47:09.719 --> 00:47:10.119
Excellent.

696
00:47:10.559 --> 00:47:14.599
And here's a headline where healing happens. So find out

697
00:47:14.639 --> 00:47:17.679
more at Sabona ranch dot com. Michael back over to you.

698
00:47:18.400 --> 00:47:21.119
Excellent, Thank you Chokey for that. It was a great

699
00:47:21.159 --> 00:47:26.199
complimence today. So in closing, let me give you the

700
00:47:26.360 --> 00:47:31.159
exact steps to implement the profit multiplier system in your business.

701
00:47:31.199 --> 00:47:36.039
So number one revenue leak detection. So you analyze your

702
00:47:36.079 --> 00:47:41.159
true costs, which is the first step. Review pricing structure, structure,

703
00:47:41.239 --> 00:47:48.239
preview pricing structure, evaluate customer profitability, assess service costs, monitor

704
00:47:48.440 --> 00:47:53.199
value delivery, and then track profit patterns. The next step

705
00:47:53.400 --> 00:47:57.239
in the profit multiplier system is the cost structure transformation.

706
00:47:57.960 --> 00:48:01.119
So you map out the fixed costs, You identify your

707
00:48:01.159 --> 00:48:06.840
variable options, your plan transitions, you build partnerships, keep that

708
00:48:07.079 --> 00:48:11.199
always keep that in mind, create systems and measure results.

709
00:48:12.079 --> 00:48:17.360
And then the third is value capture optimization. This is

710
00:48:17.440 --> 00:48:20.360
where you audit your current value, what type of value

711
00:48:20.400 --> 00:48:24.840
you're providing your package services. Remember we call it talk

712
00:48:24.880 --> 00:48:28.800
about often that tiered pricing and packaging and bundling your

713
00:48:28.880 --> 00:48:34.320
price strategically. By giving the customer options, you implement systems,

714
00:48:35.079 --> 00:48:38.360
you train your team, and you monitor results. You know,

715
00:48:38.559 --> 00:48:42.239
if you start with just one area this week, look

716
00:48:42.320 --> 00:48:46.800
for one revenue leak that you can plug one cost

717
00:48:47.239 --> 00:48:51.599
you can transform well, one value point you're not capturing,

718
00:48:52.119 --> 00:48:55.400
you'll be doing. You'll not only have a successful week,

719
00:48:55.880 --> 00:48:58.679
but you'll have the start of a very successful business

720
00:48:58.960 --> 00:49:01.960
because remember, you don't necessarily need new customers and new

721
00:49:02.000 --> 00:49:05.880
products to increase profits. You just need to better manage

722
00:49:06.079 --> 00:49:11.519
the money already flowing through your business. And to get

723
00:49:11.599 --> 00:49:14.519
a copy of the book Powerful Business Strategies, simply go

724
00:49:14.599 --> 00:49:19.800
to our website www dot NEXTSTEPCFO dot net. It's totally

725
00:49:19.920 --> 00:49:23.760
complementary and until next Monday at noon Eastern time. But

726
00:49:23.920 --> 00:49:27.599
Chucky Obio, my name is Michael Barberita, and remember, don't

727
00:49:27.679 --> 00:49:30.960
keep doing what your competition is doing.

728
00:49:32.760 --> 00:49:35.840
You have been listening to Powerful Business Strategies finding out

729
00:49:35.880 --> 00:49:39.519
that everything you ever learned about growing your business is wrong.

730
00:49:39.840 --> 00:49:43.000
Tune in next week and every week at noon Eastern

731
00:49:43.119 --> 00:49:46.559
time on W four CY Radio with your host, Michael

732
00:49:46.599 --> 00:49:51.199
Barbarita of Next Step CFO and moderator Chugy Obio