62. 7 Ways to Double Profits Within 12 Months - Strategies for Consultants and Business Professionals

Double Profits Within 12 Months [Everything Business Consulting EP 62]

Double Profits Withing 12 Months - This episode of Everything Business Consulting dives into some potential strategies to improve you business, or the business of your clients - if you're a Consultant, Coach or Advisor.

Want to go straight to the value? Click the time stamps below:

1:30​ - 7 Ways to double profit in 12 months

2:15​ - 1. Increase revenue

5:10​ - 2. Reduce the Cost of Goods Sold

10:50​ - 3. Decrease Wastage

13:25​ - 4. Reduce Expenses

15:50​ - 5. Reduce Payroll Expense

17:45​ - 6. Contract out jobs or services

18:48​ - 7. Import raw materials

21:25​ - Recap

Transcript

David: Welcome to Everything Business Consulting, a podcast dedicated to business consulting success. It's for people who are already a business consultant that want to improve their skills, are an accountant and want to offer consulting services to their clients, are an ex-corporate who wants to get out of the rat race and become a self-employed business consultant. Or you've owned a business before and now want to use the skills that you've learned to help others in business.

I'm David Thexton

Julius: and I'm Julius Bloem. 

David: Everything Business Consulting is brought to you by ConsultX, a global business consultant community that gives you everything you require to take control of your lifestyle and income by becoming a successful business consultant. ConsultX guides you through the entire process of building and running your own consulting business with a complete online academy, a system to acquire clients, a framework and software to provide them with real results, and an international community of like-minded individuals. There is also a suite of resources and much more. To find out more about this opportunity, come and visit us at consultx.com. 

Julius: Today, we're going to talk about seven ways to double your clients profit in the next 12 months. David, should we talk about how we can do this? How we can actually double someone's profit within 12 months? Because to me, that sounds pretty ambitious. 

David: Well, before I answer that question, I want to tell everybody that inside the head of a client is a big, jumbled-up mess of all of the problems and issues that they have. They tend to work on all of these problems at the same time, which is impossible for most of us. So clients tend to be in confusion most of the time and become unable to sort things out. 

Julius: So David, what is the first of the seven methods and how are you going to increase the profitability for your client?

David: Over the next 12 months? It's revenue, that's start with the most simple one of all. If you can increase the revenue, and providing that revenue has a healthy, gross profit attached to it, you will increase the profit. 

Julius: And how are we going to increase this? 

David: Well, I suggest that we examine all the aspects around revenue, such as how to increase it, new products, maybe there's a new products that can be developed. New geographical areas, where you can expand to other places, new customers or clients, depending on what you call them. Maybe loyalty programs where you can bonus the people, your customers, or clients for them to purchase more off you.

Julius: Do some of these things, David, obviously you're going to have to do some more sales and marketing activities, but we're just looking at this from a more overall point of view.

David: Yeah

Julius: We need to increase revenue, that's one of the ways.

David: Yes, yeah, yeah. Providing, you're making the right amount of gross profit. 

Julius: Yep, perfect, what's next? 

David: Increasing prices is always a very simple one. I've had many clients myself where they haven't had a price increase for five years and things like that. Lowering discounts, is the other side of that, of course, where you take the discounts down or don't offer them at all.

Another good way is to bonus the salespeople, based on their actual increase in sales.

Julius: And that helps, well, encourages them, basically, to sell more. 

David: Yes, of course, just right, yeah. Exporting is good because it's like, that's the equivalent of new areas really, but going offshore, overseas somewhere. In the case of supermarkets and big-box stores, department stores, and things like that, you could produce house brands or contract packing.

It's roughly the same thing. So you could be, it might be Walmarts for example, you might be producing potato chips and you might be able to do a brand of potato chips for Walmarts, which would be significant, I would say. And the modern-day version of increasing sales is to get a website. A website that transacts business and sell through the internet. 

Julius: Yep, anything to increase revenue we've seen with COVID that a lot of online sales have gone absolutely through the roof, up 100, 200, even three, 400% in some cases.

David: And you've seen restaurants making up meals and getting them delivered via Uber and things like that.

Julius: Yeah, yep, absolutely. 

David: The sky's the limit.

Julius: Getting that revenue up. Okay. I will take over the next one. So David, the next part of increasing our profits over the first 12 months you're working with a client, would be to reduce the cost of goods sold. This is an area that can be a mini gold mine for saving money and basically put it back into the client's bottom line. 

So some ideas to do this would be to lower the price of the cost of goods sold. So you're thinking, how might you do that? You could arrange a table contract with suppliers, David, what's a table contract?

David: Well, it's where you go to a supplier and you pledge loyalty to them for a period of time. Let's say 12 months, let's say you own a bed shop and you're buying mattresses.

You go to the mattress supplier and you say, I'll buy a thousand mattresses off you over the next 12 months, but I want to negotiate a volume discount on this. So they get the loyalty, you get 10% discount on every mattress that you buy, and you factor that into an agreement. Typically called a table contract.

Now that's better than buying them every single month and paying the full price for them. 

Julius: Absolutely. Any discount, and, as you say, it's going to be a small gold mine, and it's going to add to your bottom line of the business. The next point we have in reducing cost of goods is to pay cash for goods upfront in order to get a discount. Now, David, you've got a really good example where you did something in the business that you were running, to get a cash discount. You factored your invoices. Can you tell us about that? What happened and how you were able to pay a small percentage to get a large percentage?

David: Yes. Well, well, we used to factor our invoices, the company that I owned, and what that does, if you're not familiar with that term, you take your invoices and a form of a finance company buys your invoices off you. And then when your customer pays, the money goes back to the factoring company it's called off-invoice discounting, it's called factoring, it's called something else too I can't remember. 

Anyway, so we had all this cash, we always had this big pile of case in the bank. 

Julius: How much does it cost? What sort of cut do they take? 

David: Well, they charged us 2% per invoice. So I went to suppliers and I negotiated eight to 10% discount by paying them cash. Now, these suppliers were desperate for cash, so they gave me 10% and I paid 2% for it, cut a long story short and I made 8% on top of that. That's what I did there. 

Julius: Which it's very healthy to do something like that. So then it's another idea to have in your toolkit. Now, the next idea in reducing costs of goods sold is to get quotes from other suppliers. And obviously, you shop around like a lot of places you know, you can get them to be competitive, especially if you know, they might be new in business, or you might be a new client to them and they really want to get you on board. And then in the same vein, a lot of companies want to keep you as a client because we're in a very competitive, sort of environment at the moment where there is a lot of kind of external circumstances going on with the virus and that sort of thing.

And so every client that someone has, every customer is very valuable. So people are willing to sharpen their prices in order to keep things. So shop around and get quotes from other suppliers. The next point would be to organize a consignment system with suppliers. David, have you had any success with this in the past?

David: Yes, and it worked really, really well. This particular supplier, we were spending a lot of money with them and I suggested to them, that we put a cage in the warehouse. And their products went into the cage and it was their responsibility to make sure that we had a min and a max, wherever it got down to a minimum, the company would ship in enough product or raw materials to go up to the max.

And it was their responsibility. So what we had was we had a mini-warehouse of theirs inside our warehouse. Now that meant the end of the month, they would call and would count up all of the stock and we will be billed for what we used during the month. And that meant at the end of the month, we had no raw materials left because they owned it.

So the raw materials did not belong to us until we use them in our factories.

Julius: So you weren't paying any cash, anything out of, it was nothing out of cashflow basically to be able to.

David: No, because you need cash flow to be able to have raw material on hand. 

Julius: Yep, absolutely. And another option to do that, and this is only going to work in some types of businesses, is to get the supplier to invoice you only once the goods are used. And that's very, very similar. 

David: Well, that's very similar to what we're talking about on a consignment system is that you only get invoiced for what you've used.

Julius: And another, another way, which is probably a little bit more modern and more so for an online business, is to drop ship and that's where you don't even hold the stock, you basically just sell it. And once it's been purchased, then you get the supplier to dispatch it directly to the customer or to the client. So that's another option that you could do with a business that's capable to do that. David, what's our next way to increase our profit within 12 months?

David: Well wastage, if you're a manufacturer. If you were just a wholesaler or a retailer, there shouldn't be any wastage at all, but if you manufacturing, there's going to be wastage and there's potentially huge savings if you focus on that. So, you could look at production wastage and the thing is, can the wastage that the factory is producing it or causing it, can that be sold, you know, paper, cardboard, metal, or all sorts of things. Can it be sold to somebody and can some money be recovered out of it? Another is, can we lower machine wastage on the machine. And if you've got machines, obviously, if that's what's happening, because, if a group of employees focuses on lowering waste, then their attention is drawn to that.

And if you start measuring it, then if you can measure it, you can manage it, you've heard that a few times before. Then get everybody working on it and publish the results on some form of a graph or, reporting mechanism in the lunchroom or something. The other thing is can the waste be recycled by the supplier?

We used to buy a lot of plastic bottles and there'd be something like about maybe a three to 4% wastage of the plastic bottles. We would save them up, give them back to the supplier and they grind them up again, and make them into bottles again, so that worked very well. And can the supplier take cost out of the raw material?

Quite often, you will find that your client is buying raw materials, I'm thinking of anything, cardboard, paper, glass, plastic, whatever, metal products. Can the supplier take cost out of the raw material and lower the cost of goods, which flicks back onto the other one, the cost of goods sold.

Julius: Another thing to think about with wastage is to basically factor wastage into the price of the product or the service you're offering. You know, that if you're offering a service, you're probably gonna have some period of downtime. So you might want to add that onto the hourly charge or the fee that you're charging for the service, or if you're producing something, factor that in as well, so you can account for the wastage that might happen. Obviously, you want to decrease it, but if you can be paid for it as well that's fantastic too. 

David: Yeah. 

Julius: Now the next thing we have to look at is expenses, and reducing expenses is quite similar to cost of goods sold, but a little bit different as well. So they seem to grow by themselves as employees like to spend money in businesses when they grow and they get bigger and bigger and there's more employees and the expenses just go up and up.

It's not their money, so they don't think and treat the money and the business like it is theirs, and they're not always as careful as what you might like them to be. So when you come in as a consultant and you're looking for things to do, often looking at expenses is a really, really good way to gain control of the profit of a business.

Now, the first thing that we recommend to do is to form a task force and tear every single expense of the business apart. And you'll find many, many, many areas in the business where there are lots of, a few cents here and a few cents there, being wasted. So you wanna pick all of them up. And again, that's just going to put them all back onto the bottom line.

And then they add up very, very quickly. There are companies that actually do this, this is the only service they provide, they do it for a living. They go into a business and they look for expenses that can be saved and they keep 50% of the savings they find for 12 months. Think about that, there's businesses, there's so much money out there. And expenses has been wasted. 

Basically, there's an entire industry of people that go into businesses, they find this money, they save the money and they make an absolute fortune obviously for the business, but for themselves as well. And as a consultant, if you can put that, you know, another feather in your cap, and you can take that to business owners. You're going to look even better and be able to save this business more money and get them to make more profit. Remember, it's easy to spend and it's hard to earn. It's much easier to spend money in a business and it's actually quite difficult, can be difficult to make money. 

So it's easier to look for the savings and expenses rather than to go out and increase the size of the business and get more employees and increase sales to improve your profitability. That way, if we can save some money, it's far easier because a penny saved is a penny earned. What's next, David?

David: We're going to have a quick look at payroll because that tends to be in a lot of businesses. The biggest area of expense wastage, as the subject of employees and payroll, seems to enter this quasi psycho zone, as people are very sensitive to it, but having too many people could sink the ship, will bankrupt the business and lose everybody their jobs, which is 

Julius: We don't want that.

David: No, so good idea is to do a job spec or organizational chart with no names, put it up on the wall with the management team, and concentrate on the job descriptions and responsibilities rather than the people. And what'll happen is you'll find people who are doing nothing in the business and should be made redundant.

Julius: Oh, do you have an example? 

David: Yeah, well, I consulted a business a few years ago and it something like 130 staff and we did this exercise and we found, I think it was 18 or 20 people who were doing nothing. It's incredible. And it's a trick, so you've got the owner of the management team and, because they can't keep 120, 130 people in their head and you write down, right let's start at the top. 

We've got the CEO and then we've got the sales manager. Then we've got the warehouse manager, production, so-and-so all the way through. And then we've got Bill, who works on this machine, and Janice and so on. And to get to the end, you add them all up and you go, there's 101 people, why are we paying 120?

And that saved something very close to a million dollars in the payroll. 

Julius: Well, if you divided that by the percentage, you're going to be saying a sixth of the expense of payroll, which is pretty significant in a large business. 

David: It is, yeah, yeah.

Julius: Continuing on from payroll, you should look at contractors. So whilst you're looking at the payroll, you want to consider some of the positions able to be contracted out to contractors because you can save a pretty significant amount, 50% perhaps of the value of that you're paying out for people's jobs. Now, the world is changing and I had a client whose PA worked for him on a circus train in Russia.

David: Isn't that amazing. 

Julius: That's pretty phenomenal. And, we are getting into a situation where it's just more and more accepted that you contract out to specialists, people who can do a particular thing. They might on the surface look like they're going to charge you, going to be a bit more expensive, but they're so efficient and good at what they do and productive that they do end up saving you money in the long run.

Yeah, yeah. And that's what you're looking for. So see if there's any opportunity to get outside people, contractors in to do very specific jobs. 

David: The next one we're looking at, number seven, is importing raw materials. Now I'm not a big fan of this, but when in Rome, et cetera, do as the Romans do. And, in many cases the businesses competition will be importing raw materials, and to keep competitive, your client may need to do.

The savings could be enormous so get the team to work on this idea vigorously. And I'll give you a good example of this, I used to own a beverage company and we used to buy New Zealand apple juice, from down Napier Hastings and beautiful apple juice. And, then the Chinese government, what they did was, they thought here's a good idea.

And they had all this land that was, had nothing on it. So they cultivated it all and they planted a hundred million, a hundred million apple trees, and then they allocated it out to certain families and all those sorts of things. So they started growing apples and then the Chinese government, put in apple processing plants where they juiced all these apples and turned them into apple juice concentrate.

So here were we in New Zealand buying this beautiful apple juice from mid-North Island and paying something like about, think about $4, a concentrate liter for it. And the Chinese representatives came in and they could sell it to us for a dollar per concentrate liter. That's 25% of what we were paying.

And I'm being silly old, David, I said, no, no, we're going to support New Zealand made, we're going to support New Zealand made. So we did for a number of months and then our biggest opposition here in New Zealand, which funnily enough was the apple and pear marketing board. Started buying Chinese apple and they bankrupted their own apple industry in New Zealand to get that 25% cost price.

I had to follow them, I had to buy Chinese. So the whole New Zealand, apple juicing market was just about totally destroyed over that. I didn't want to do it, but like I'm saying, when in Rome, do as the Romans do, I had to do it because it would have completely wiped us out. 

Julius: Fantastic, so that was the seven different areas where you can look to improve your client's profitability.

 Just to recap, number one was to increase revenue. So this can be increasing sales price or increased sales volume. 

David: Yep. 

Julius: Two, to reduce the cost of goods sold. That's the price behind everything that you're selling. If you can get that down, then that is going to be a small gold mine for you. Three, reduce wastage or at least allocate some of that wastage to the cost of the sale.

Four, decrease expenses. We should also mention that if your businesses growing and you're increasing the sales volume or something like that, you're probably going to have an increase in expenses or payroll or something like that. But as a percentage or proportion of it, you want to see it decreasing, don't you?

David: You do.

Julius: Fantastic, then decrease payroll. Number five, whilst you're at it, look at contractors that's number six and finally, number seven is see if you can import raw materials to really reduce that cost of sales again. Do you have any final words there, David? 

David: Well, it's everywhere Julius and, I've said a number of times that the job we do as a Business Success Partner is to work with business owners to increase their profit, growth, and their business value.

And somebody has to get in there, and they have to tear this business to pieces and find those savings. That's why we're confident that we can double the profit of our client's businesses in the first 12 months of working with them, you know, and all the corporates that I've been to, I've never seen an office door that's got James Smith, manager of profit, growth and business value. 

There isn't a job, they don't do that. It tends to be broken down and spread amongst all of the executives. But the upshot is that nobody does it. So when we go in as Business Success Partners, that's one of the first things that we do, one of the many things that we do, but if we're making a promise, the best to our ability to double their profit in 12 months, which is a pretty compelling proposition, then this is the some of the methods that you use to do that.

Julius: David, I can't imagine you going and talking to a business owner and saying, hello, my name is Julius Bloem, and I'd like to double your profits in the next 12 months. Would you like to work together? They're not going to turn that down either. 

David: No, absolutely not. Unless they're crazy. 

Julius: They would be mad. So pay very careful attention to what we've just said.

Go listen to it again, perhaps, because there's some real value nuggets in there and it's actually quite simple in most businesses to double your profit within 12 months. It sounds like a pretty big goal and very audacious, but it's absolutely achievable. 

Thank you for listening, Everything Business Consulting is brought to you by ConsultX, a global business consulting community that gives you everything you require to take control of your lifestyle and income by becoming a successful business consultant. ConsultX guides you through the entire process of building and running your own consulting business, with a complete online academy, a system to acquire clients, a framework and software to provide you with real results, an international community of like-minded individuals, and a suite of resources, and much more.

To find out more about this opportunity, visit consultx.com, that's consultx.com.