How to Increase the Most Important Number in Your Business

So just what is the most important number in a business?

Marketers would say number of sales. Accountants would say break even. But what number matters most for business owners is related to what they want most out from their business ownership… freedom, or in other words a lifestyle with both time and money!

Too often business consultants and coaches are only treating symptoms, or they don’t give business owners what they truly want. They help you to grow your business – i.e. more turnover, which means more staff, more responsibility, more stress and no direct personal benefit.

So business owners take note and answer this question thoughtfully…

Do you want more hard work, more time away from your family, or to be at work in your business every hour of it’s operation, or do you want more money, more time and more freedom?

I haven’t yet met a business owner who wished they could work harder or longer hours.

They all want a better lifestyle. This is what is leading to the most important number in your business, or in any business.

It’s not your break even, or number of sales. It’s not your profits either, although that’s getting warmer. When people say they want to increase their sales or profits, what they are really saying without realizing it is that they want more turnover, and with it more responsibility from having more staff.

What matters most in business, which is the most important number in your business is… your Net Profit Margin!

This is your take home profit percentage. It’s a measure of how efficient your business operation is. Think about this, are you in business to work hard, or to work smart? Would you prefer to work more hours for less money or less hours for more money? Obviously the latter.

Do you realize the research collated over years of interviewing accountants has revealed that 90% of businesses make less than 10% net profit? Do you realize how many business owners even know their net profit margin? Very, very few!

Accountants are telling their clients their net profit margins are low, the accounting software doesn’t point it out so business owners are almost completely unaware of this most important number.

If your business turned over $1,000,0000 and had a 7% net profit margin it would have $70,000 net profit. If your business turnover over $500,000 and had a 15% net profit margin it would have a $75,000 net profit. Which business would be less stressful, easier to manage and more enjoyable to be the owner of?

The answer again is obvious. But why don’t businesses enjoy a 10% or higher net profit margin?

Great question!

Its because of a few reasons. First of all as mentioned the majority of business owners don’t even know their net profit margin. Second they don’t know its perilously low and so this makes their business dangerously close to financial disaster. Third, if a business owner has the rare insight to focus on net margin increase and not sales, they are lost as to how to do it.

Yes you can put your prices up, or reduce expenses, but there are 13 other strategies to increase your net profit margin few people in the world know, let alone teach business owners.

To explain how to implement a number of these 15 strategies isn’t something that can be explained here, but I will leave you with this one thought.

Is it better to have less customers paying you more money, or more customers paying you less money. all things being equal?

I suggest you look to see what your own net profit margin is (Net profit as a percentage of your total revenue or total sales income) and if it’s below 10% put your prices up 10% and see what happens. You might need to do it with some of your products/services first, but in every client of mine who has do so in over 59 different industries has benefited with an increase of net profit – instantly! Only one business in 11 years of business mentoring experience has experienced a detrimental outcome from a recommended 10% increase in all product/service prices and that was a video rental store.

So get started now. Look up your net profit margin and think about this. Your figure is the average of all product/service lines you sell. If you knew your gross margin on all these categories you would see that 80% of your profit (margin) comes from 20% or less of what you sell. There’s a clue I’ll leave you to ponder!