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(Podcast) Finding the Profit in Your Business

how to know my profit margins

Are you making money in your business? I mean, cash in your pocket type money. I’m not asking if you’re making SALES, I want to know what’s left over for you, what’s the profit?

I meet so many creative business owners who happily tell me their sales figures. You hear it all the time – I own a million dollar business blah blah blah…

These sales numbers mean almost NOTHING to me without knowing the true costs of the products sold and the gross profit. Consider Nasty Gal, which Forbes says had close to 300 million in sales – before they went bankrupt. In 2016, “Nasty Gal secured the top spot on e-commerce bible Internet Retailer’s Top 500 guide thanks to its reported 92.4% compound annual growth.” 

It’s not about the sales…it’s about the profits

In today’s podcast episode, I walk you through a simple exercise to lay out your best-sellers by sales volume, and then again by margins. When you look at these reports side by side, the picture often looks a lot different than you think it will.

Understanding exactly where the true money (the profit) comes from in your business will help you make decisions on how to grow and what to work on next. 

NOTE: you’ll want to download this cheatsheet BEFORE you listen to the episode.

Listen to this episode on iTunes or Stitcher Radio. You can also download it to any device as an mp3 by clicking the download icon under the bar above.

In this Episode: 

Question for you… Are you willing to spend a little time getting your sales #’s together and compare best-sellers by SALES vs. best-sellers by MARGIN? Let me know in the comments below.

Thanks for reading and listening.

-JH

P.S. Bonus points for telling me what you discover after you do your “assignment”. I read ALL comments and can’t wait to hear from you!

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2 Responses

  1. Hey Jane:

    I had already worked on this for my own product line. I just listened to the podcast and studied the work sheet and my own numbers. I’m a little confused about something so here is my question: On the Best Sellers by Margins Sheet, what is the most important~The Gross Profit OR the Profit Margin percentage??? I see that on that sheet, The Lucy Pillow is ranked #1 in Gross Profit BUT its’ Profit Margin Percentage is only 48% compared to some other items which came up 72% like the Mariana Blanket. So I’m trying to get if you’re saying to go with the higher Profit Margin percentage products?? or to go with the higher Gross Profits products?

    1. This is a great question, Monica. The most important thing is a combination of profit margin with how much you can actually sell of that particular item. For instance, if the Mariana blanket has a 73% margin (yay) but there’s only a very small market who would buy it (boo), it’s not an important product for you. You’re looking for the product that has a high profit margin already AND also has potential for high sales volume. Recall the example in the podcast about the baby bib that’s only relevant for a certain type of buyer for a two-month period. The market is not large enough for scaling that type of baby bib – no matter how great the profit margin is per item. It has to be something that there’s a large market for and ideally repeat sales.

      For example, if you see a product on your sheet where the gross margins are fairly low but the profit margin per piece is high, take a look at it. Ask yourself why you haven’t told that much of that item? Is it because the market’s too small? More likely it’s because you haven’t paid much attention to it or marketed it the way it deserves. Some of these sleeper products could be amazing money makers if we just realized which ones they were and turned our attention and resources to them.

      Another thing to consider is if it’s a repeat purchase product or not. That’s why I feel the bridal business is very tricky. The margins may be high but you don’t get repeat customers and that’s a huge challenge. You’ll always have to drive more and more and MORE traffic rather than work with people who have already bought. Repeat business is easier and costs less in marketing dollars.

      I hope that helps explain things and please let me know if you have more questions.

      Jane

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