I am guilty as charged.
Ayo told you gentlemen and ladies to hold me responsible for not receiving his personal email.
Well, I am not only pleased to inform you that I am being held, but also been dragged and choked for hoarding Ayo’s mail.
Well, I still dey here for you.
.
Recently we had a post on our Instagram page and we had to shed more light on it because we figured it is an important part of a business that should be discussed.
The statement is, YOUR SALES IS NOT YOUR PROFIT.
If you ask the typical business owner what he needs to reach his goals, the answer will be something around, “More sales.”
However, did you know that many owners may just be selling at a loss, regardless of the number of sales they make?
It may be true because sales and profit are not the same things – sales do not always equal profit. Just so you see it again.
Let’s follow the money in a simplistic example to get a better idea of how sales may, or may not, put cash in your pocket at the end of the day.
Alex sells a product at N10,000.
A customer buys 3 units of the product and gave N30,000.
Can you say you own the entire N30,000? Of course, NO, but I can tell you for a fact that some business owners do not still separate the product cost from the profit.
They just put everything in one account and before you know savings or current happens.
See listen, you do not put it all into your pocket and call it a profit.
You have to subtract all expenses, costs, and taxes for obtaining and selling the products.
That’s what dictates your price.
Business owners are continually challenged by how to balance profits and that is how a company can make a high volume of sales and still go out of business.
So, how do you avoid making this mistake?
If the devil is in the details so is an angel. Profit engineering will help you control the numbers, rather than the numbers controlling you.
Knowing how to use hard numbers is vital to making a profit. With hard numbers, you can ask the right questions and come up with the correct answers.
What are the questions you need to proffer answers to?
Why is my profit not sustainable?
Do I have to raise prices, lower costs, control waste, buy in bulk, and improve productivity and quality?
Is it cost-effective to fix the problems or should I discontinue them?
What percentage of sales do they represent?
It is best to understand your numbers, it allows you to ask practical questions, make rational decisions and implement reasonable solutions.
With this point of mine, I hope I have been able to inform you that structuring your cost is more important than your sales.
Thank you.
Bhet, before I go, lol
We are launching Fedhagap in a few weeks. Fedhagap will help you up-sell and supply your products or services to those big clients that you have been afraid to sell to.
Finally, we at the Caladium Lagos SME Bootcamp are looking at starting an Instagram live series on Business 360. It is going to be a recurring series with actionable information to help you become more profitable in your business.
We can continue the conversation in the comment section.
You can reach me via alex@lagos-sme.com
For more updates on MSME events, product features, knowledge sharing, and many more. Please follow us on our social media pages, Facebook, Twitter, LinkedIn, and Instagram