Profit Margin Maximization

Transcription

1 Profit Margin Maximization

2 Download Page Password valueadded2013 PowerPoints, videos, transcripts, materials

3 CPE To qualify: > / 75 minutes / 5 polling Sandra L. Leyva, Inc. is registered with the National Association of the State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of accountancy have final authority on the acceptance of individual courses for CPE credit. Complaints regarding registered sponsors may be submitted to the National Registry of CPE Sponsors through its website

4 Introductions Michelle Long, CPA, MBA Founder of Long for Success, LLC Co-Founder Ultimate Accounting vcon 10 Women Who Inspire a Profession by Accounting Today Small Business Influencer Awards Community Choice Winner Financial Services Champion of the Year by the SBA National trainer for Intuit Author of Successful QuickBooks Consulting & How to Start a Home-Based Bookkeeping Business

5 Introductions Sandi Smith Leyva, CPA Founder of Accountant $ Accelerator Clients in 44 states and 6 countries Co-Founder Ultimate Accounting vcon Publisher of BizBoost News and Cloud Accounting News 300+ articles in Intuit ProConnection newsletter/blog Featured in CBS News, PBS, Accounting Today, Journal of Accountancy, CPA Trendlines, & The Practical Accountant Author of 5 Simple Steps to Get More Clients and more Founder of Positive Prosperity nonprofit

6 Agenda How to approach a client to get started helping them in this area How to become a sleuth to uncover profit and contribution margin issues What tools and resources you need to deliver this service without breaking the bank How to package, marketing, and deliver this Profit Margin Maximization service How to communicate your findings to your clients so they understand what to do

7 What Do SMB Owners Want to See Most want to focus on sales Some concerned with cash balances Few understand margins Margins = Profitability = Success!

8 What Sandi Wants to See Full P&L by Service Line profitability by: Classes or tracking categories Tip for bookkeeping clients P&L by Customer

9 Key Margins Profitability Margins: Gross Profit Margin = Gross Profit / Sales Operating Profit Margin = Operating Income / Sales Net Profit Margin = Net Income / Sales

10 Industry Averages - Benchmarking RMA or BizStats.com

11 Monitor Trends

12 Monitor Trends

13 Xero Management Report

14 Other Considerations Net Profit Margin = Net Income / Sales What about Sole Proprietors net profit? Owner s Draw Self employment tax SEP IRA Desired Profit

15 Other Key Margins CSF (Critical Success Factors) Profit per: Customer/Job Item Employee Location Truck Other

16 Contractors, Catering & Others with Jobs Sales by Customer Job Profitability

17 Retailers, Restaurants, ecommerce Sales by Item Item Profitability

18 What about Overhead? Overhead may include: Office rent & expenses Insurance Admin salaries Taxes General supplies and materials Truck / equipment costs Determine an O/H allocation rate (keep in mind materiality) % of revenues, hours Google industry overhead allocation rate

19 Example to allocate to job or location Blog Post:

20 Pricing? Start with Sales How did you set your prices? How competing? Lowest price / high volume Higher price -- better service / quality Sufficient markup? Industry average?

21 Pricing Start with Sales Use tool in CDR (Accountant > Client Data Review > Troubleshoot Inventory)

22 Marketing Do they have a plan? Start with Sales Promotions how often? What kind? Coupons / discounts Product placement Effectiveness Sales reps / employees?

23 Start with Sales Product mix? Promote high margin items Bundle with best selling items (loss leaders) Train employees (provide incentives) to up-sell, add on Higher sales per customer, per table, etc.

24 Gross Margin Possible causes of deteriorating GM %?

25 Gross Margin Sales too low? Prices too low Not recording sales $5 or free if no receipt Voiding sales Recording Small vs Large Possible causes of deteriorating GM %?

26 Gross Margin Cost of Goods Sold? Supplier price increase Waste Employee consumption Theft Possible causes of deteriorating GM %?

27 Operating Margin Expenses re-negotiate / look for ways to reduce expenses Rent Cell phone / internet Insurance Suppliers Reduce inefficiencies in workflow and operations Monitor things like job materials, supplies, small tools prevent theft & waste

28 Taxes Net Profit Margin Tax planning opportunities Right entity? Profit for owners

29 Client pain points Packaging & Marketing Wonder why there isn t more money / profit Work hard without sufficient profits Unsure about pricing Downward trends to be addressed See Word file for marketing copy you can put on Web site Flyer

30 Client intake form Checklists Your deliverables Delivering Current P&L and margin reports Education sessions to suggest profitability improvements Follow-up meetings on a regular basis

31 Delivering Reports and Margins See client intake we have developed Keep it simple Ensure client understanding tie it to actions they need to implement Focus on trends better or worse Focus on CSF (Critical Success Factors) Recurring service set up schedule

32 Client Implementation When delivering your recommendations Make sure key people are present Get buy-in immediately for any change to implement Present implementation plan for each opportunity Follow up include regular follow-up meetings in your package

33 Your Action Items What one thing will you do from this webinar? Mark your calendar, to do list, project management system, etc.