How big is your profit gap?

Pay close attention as this may dramatically increase your whole business income.

If you have a service business, this is 100% applicable to you.

And even if you have a product business it’s still relevant as you’re selling both materials and labour.

Let’s say you have a service business like a web designer. You work by yourself and invoiced €40,000 last year. Your hourly charge out rate is €80.

Let’s crunch some numbers.

Sales €40,000
Divided by 48 weeks = €833
Divided by €80 = 10.4 hours per week

Which means, on average, you worked 10.4 productive hours every week last year.
What were you doing the rest of the time?
How is this possible you may ask?

Not suggesting you weren’t working but those hours could be spent on meetings with potential clients, travel, admin, marketing etc

Of course there was also, most probably, extra time spent on client jobs that you did not charge for.

Ok, let’s crunch some more numbers and assume you worked 3 productive days per week (which does not seem unreasonable).

Productive hours (3 days x 8 hours) 24
Multiplied by €80 80
Multiplied by 48 weeks 48
Sales €92,160

Your sales just went from €40,000 to €92,160, an increase of 230%.

And if you have a service business and have a team of people working for you, the news is even better. I have done this exercise for architects, engineers, accountants, solicitors and others and I always find ‘lost’ profit.
Here’s how it goes.
Multiply the people by their hourly rate by 32 hours per week. So a senior architect could be charged out at €80 per hour, which is €2,560 per week. Let’s keep this real simple and assume there are no junior staff at lower rates – just 10 senior architects.

10 architects X 32 hours X €80/hour = €25,600

When I ask for their average weekly ‘actual’ sales, guess what the number comes in around?
Sometimes it’s been €21,000 but other times it’s been as low as €12,250.
Which means that over 52 weeks, that architectural firm had sales of €637,000 when it should have been €1,331,200.
They somehow ‘Lost’ €694,200 of profit over the year. This figure seems incredible and hard to believe but I have seen these numbers come out like this on numerous occasions, so this is not an isolated case.

You may well thinking “How is this possible?”
It’s possible because these firms don’t actually think this way (or grab a calculator like I do and see if their profits are going down the drain).

And if you own a product business and think “This does not apply to me”, think again. In recent weeks, I found similar profit gaps of between €114,000 up to €417,000 in product businesses.
This is all ‘popping’ out of my 80:20 analysis.

Over the last 6 months, I have helped my clients get some extraordinary results and helped them grow their profits significantly. And the amazing thing is, we’re doing this without increasing sales.

All this profit is ‘hidden’ within their existing customers.

You just have to know where to look.

Neil

P.S. if you have any questions on this email or would like to suggest topics I could cover, please email me at neil@quantum.ie

If you’d like to see short videos on similar topics, please click here https://www.quantum.ie/category/profit-tips/

If you’d like to see some ‘How to …’ videos on similar topics, please click here https://www.quantum.ie/category/profit-tips-expanded/

If you’d like to talk about these topics with me, one to one, just drop me an email – neil@quantum.ie