It can be easy to overlook the difference small changes can make to your business. In fact, even a 1% change in your expenses or the value of your sales can have a big impact on the bottom line of your business. Here are some examples of the power of one in your business.
Increase your price by 1%
Let’s image you make 100 sales per month averaging $195 each. That produces revenue of $19,500 per month.
Do you think your customers would notice if you increased your price by 1%?
It’s unlikely but it could make a great difference to your profitability. In this example, a 1% price increase would change the average sale to $196.95 so let’s say you increase your average sale to $197 each.
Your 1% price increase will now earn you an extra $200 per month. How does that sound?
Reduce your costs by 1%
Now let’s look at the impact 1% can have on your costs.
Let’s assume your costs total $7,500 each month. If your average sale is now $197, your gross margin is $12,200 per month.
By examining your expenses you find you can reduce them by 1%. Now your costs are $7,425 so your gross margin grows to $12,275 per month.
Putting it all together
In this example, simply increasing your price by 1% and decreasing expenses by 1%, generates an extra $275 per month in revenue for the business.
How will 1% change your business?
Making 1% improvements in your business can generate significant results. Start with examining your product costs or expenses, sale price and number of sales you make each month. Then do the sums. You could find the results surprising.
If you’d like some help, talk to us. Real Business Group specialises in helping high-level business owners improve the performance of their business.