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Profit is your first cost

We are approaching the start of a new financial year for many businesses and thoughts are turning to annual budgets and business plans.

If you are writing a budget or a business plan and you want to achieve a profit target, here is a very simple idea that will help you to deliver the bottom line.

Make profit your first cost!

How does making profit a cost work?

You begin with a sales number. Base it on this year’s sales plus achievable growth or whatever metric you feel comfortable with.

For example, next year’s sales are expected to be £1m.

Now look at costs. Profit is the first one, so what do you want it to be? Let’s say £100,000.

Now you know that the rest of your costs have to add up to no more than £900,000.

How you allocate your cost base is up to you but the limit is £900,000 and you have to make decisions that will live within this limit.

Hitting your sales target is usually the hard part

For many companies, hitting or exceeding the sales target is usually the hardest part of the business plan to deliver.

Making profit your first cost allows you to concentrate on the sales side, confident that if you achieve the sales you are looking for, you will also make the profit you want.

Help with profit improvement

We help businesses to improve profits. Find out more here or give me a call on 020 7384 6800 to discuss how we can help you.

 

 

Michael
@michaeljcaustin