Step 4 Golden Eggs (Profits)

Published on July 9, 2013 by

Every business needs profits to remain healthy. And, there are two areas of focus to establish and maintain a stream of "golden eggs."

Gold eggs in nest

The two areas are -  what comes in, and what goes out - or revenue and expenses.

What comes in is the essential first step and you can read more about revenues in the first post,  Solution Engine (or Perpetual Marketing.)

What goes out, or cost control is the second focus area. A mentor recently remarked, "The only thing a business must make is PROFITS!" While a business cannot survive long term solely on cost cutting activities, business costs are a very important focus when establishing a stream of profits, or golden eggs.

Costs are easier to think about and control when they are considered in different categories. These are just a few of the cost words used in business - direct, implicit, overhead, recurring, opportunity, fixed, sunk, variable, etc. These terms can be overwhelming to a business owner who just wants to make..."PROFITS!"

The first cost to consider is direct cost.

This is the bare cost to provide value to your customer. For example, when you make a fly swatter, some of the direct costs are the plastic and metal materials, the labor to put the pieces together, and the electricity to power the necessary machines.

"Margin" is what is left after the direct costs are deducted from the sales price. This amount is a "contribution" toward the indirect costs of the business. Hence the term, "contribution margin." One example of an indirect cost is the shipping department.

PROFITS are what is left, only after all costs are covered.

Your Golden Goose Business Coach can help navigate the bewildering path to a stream of Golden Eggs.

Schedule your Business Breakthrough Session here.

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Published in 6 Steps

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