Managing and maintaining profits in a wise way is one of the most important aspects of running a successful business. Mick and Andre focus on the making money rule this episode and give a better idea of what the 30% rule is and why that is just the starting point. They point out some key areas where businesses make mistakes even while following the 30% rule and how you can avoid these issues.
Mick and Andre discuss the problems with putting proportional overhead into the cost of goods sold and why it’s so important to keep calculated costs below the line. They also provide examples and exercises to help you understand where you are making money and where you’re not making money. They go into detail about scalability and how to monitor your company’s ability to scale and grow in a more profitable way.
Listen to the Full Episode:
What You'll Learn In Today's Episode:
The problem with considering proportional overhead as a cost of goods sold.
Why keeping calculated costs below the line will keep things more simple.
The easy rule of 30% and how it is important but not the end of story when it comes to making money.
How SGNA costs help us maintain our 30% margin and tell us a lot about the scalability of our business.
How to avoid the common mistake of increasing operating costs by a proportion greater than the increase in gross profit margin.
How to know when you have an operating cost problem.
Segmenting operating costs into two segments and how it helps us know how we are managing costs.
Ideas Worth Sharing:
“The problem lies in defining what that gross profit percentage is.” – Andre Gien
“How do we use our numbers to help us manage our business in a better way.” – Andre Gien
“We should be able to attract more revenue because we already have the machine, we have the machine for growth and if we keep that machine nice and lean then that additional growth shouldn’t consume as much expense as it grows.” – Mick Holly