10am-Driving Profit With Purpose

8/12/2019 10am-Driving Profit With Purpose

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2014 Orange County Convention Center Orlando Florida

Driving Profit With Purpose

Sunday, Feb. 9, 201410 a.m. 11:45 a.m.

Presented by

Steve Abercrombieand

Barbara Nuss, CPA

Profit SoupTukwila, Wash.

American Rental Association1900 19th St., Moline, IL 61265800-334-2177 ARArental.org


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DRIVING PROFITYour Pathway to Breakeven PlusProfit is not optional.You mustbuild profit to build value. Breakeven analysis is the key to developing

the overall framework for your profit plan. It is a decision making device that puts you in the d rivers seat

planning for profit instead of hoping for it.

The breakeven point represents the sales required to start making a profit. It is the point at which your

revenues exactly cover your costs, so that you have no profit and more importantly, no loss. Youll need

to grow to that point before you start to make a profit. Once you begin to earn profit youre on your way to

raising the value of your business.

Nobody is in business to breakeven. Still, it is incredibly valuable to know the minimum sales required tobreakeven because you want to do at least that much. The same process used to determine your

breakeven point will also help you determine the point at which youll reach your profit goals. We call this,

Breakeven Plus.

The more comfortable you are using breakeven analysis, the more successful you will be in managing the

profitability of your business. When you gain an intuitive understanding of your cost structure, youll be

able to answer questions and make decisions about costs and pricing knowledgeably and confidently.

Breakeven analysis helps you achieve that intuition.

Being familiar with your cost structure helps you recognize changes quickly and take appropriate action.Costs change over time usually increasing and when your costs go up your profit goes down, unless

you take action to offset the rise in costs. Typically, we are slow to react to changes in our cost structures,

hoping things will magically take care of themselves if we just wait it out. As we put off any corrective

action, more profit is lost.

The solution: Monitor your cost structure,

recognize when changes occur and react quickly.


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Your profit and loss (P&L) is your go to source for cost information. Make time to look at it often and pay

attention to trends and changes. This discipline will build value in your business. Reviewing your

financials at year-end is not often enough. Costs change frequently. If you wait until after year-end to

assess them, its too late to react.

Breakeven Plus is a tool for the present. It helps build your intuitive sense of whats going on in your

business so you can recognize change quickly and act decisively. Businesses change quickly and your

management processes have to be at least as dynamic as the environment in which youre managing.

CLASSIFYING YOUR COSTSFIXED OR VARIABLE

To begin the breakeven analysis process youll need to recap your cost structure. You do this by

classifying costs based on how they behave - either fixed or variable. This is different from how

accountants typically classify costs on the P&L. To convert the accountants P&L to a breakeven P&L,

youll review each cost and assess whether it is fixed or variable. The process usually results in

something like this:

Here are some things to keep in mind when classifying costs.

Variable costs happen because a sale is made, not because of a decision youmade.

If your sales go down, your variable costs will also go down.

Fixed costs are costs that do notvary with sales.

Things such as base rent and insurance are fixed costs because they are not affected by sales. You have

to pay the same amount for your rent and for these items regardless of how many sales you make. Those

are fixed costs. Payroll is typically a fixed cost because you have to pay your employees e ven if you dont

make any sales today.


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Fixed doesnt mean thecosts dont increase.It means they dont go up relative tosales. For example,

base rent is a fixed cost, though it may go up each year because of an escalation clause in the lease.

Insurance is typically a fixed cost, though high claims may cause it to go up over time.

VARIABLE COSTS

Costs that fluctuate as sales fluctuate

Typical examples

Cost of goods sold, certain wages,

commissions, merchant fees, bad debts,royalties, shipping and postage, delivery

expenses

FIXED COSTS

Costs that dont vary relative tosales

Typical examples

Salaries, rent, utilities, advertising, office

expenses, insurance, marketing costs, telephone,professional fees


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Costs that are typically fixed for most businesses may actually be variable for others. For example, most

businesses pay a fixed monthly amount for rent. It may go up over the life of the lease, but since it doesnt

go up relative to sales, its a fixed expense. However, a company with a space in a shopping mall may

pay a monthly base rent plus an override (additional amount based on a percentage of sales). In this

case part of the rent is actually variable. When you classify your costs, think about how they behave. Will

less sales cause the cost to go down? If not, its probably a fixed cost.

Itsnot what the cost is called, its how it behavesthat counts.

Identify each expense item on your profit and loss as either fixed or variable. Add up all the fixed expenses, and then

add up all the variable expenses. Youre now on your way to an intuitive understanding of your cost structure .

Contribution margin is the term for whats left of each sales dollar after paying for the variable costs

associated with that dollar.

If variable costs increase, your contribution margin falls and your breakeven point increases. If fixed costs

increase, your breakeven point also rises.

Everybodys cost structure is different. Some businesses have high variable costs, and very little

overhead. Others, like service businesses, have high fixed costs and very few expenses that decrease as

sales fall (because they dont have a strong inventory component to their sales). Most service businesses

have few variable costs. This is because they are selling their time and have to pay their employees

whether or not a sale is made. Managing fixed costs is imperative in a service business.

In an environment where making or selling a product is key, paying attention to changes in variable costs

is an extremely important management function. As you sell more, youll have more product costs.

Managing those costs efficiently is critical to success for retailers, wholesalers and manufacturers.

THINK ABOUTYOUR COST STRUCTURE

What variable costs do you have in your business?


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Practice Exampleidentify the variable costsV = Variable

Rental revenue 1,360,000

Merchandise and propane sales 120,000

Damage waiver 20,000

Delivery, setup and pickup revenue 100,000

TOTAL Revenue $1,600,000

Direct Costs

Depreciation on rental equipment 86,000

Cost of subrental 66,000

Rental repairs, replacements, breakage, damage and maintenance 20,000

Property tax on rental equipment 5,000

Direct vehicle costs (truck & auto for rental and delivery equipment) 100,000

Cost of merchandise or goods sold 90,000

Rental equipment fuel, supplies & all other direct costs 18,000

TOTAL Direct Costs $385,000

Gross profit $1,215,000

Payroll expensesOwner compensation 63,000

Setup and delivery labor 420,000

Sales & admin. salaries, wages & commissions 170,000

Benefits, taxes and other employee costs 97,000

TOTAL Payroll Expenses $750,000

Other Operating Expenses

Occupancy 160,000Advertising, promotion, web and selll ing expenses 32,000

Vehicle: truck and auto, nonrental 14,000

Repairs and maintenance, nonrental 4,000

Business insurance 46,000

Computer expenses 10,000

Other depreciation 7,000

Bad debt expenses 30,000

Other operating expenses 92,000

TOTAL Other Operating Expenses $395,000

Operating profit$70,000Other Income and Expenses

Interest expense 24,000

Profit Before Tax $46,000


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Practice Examples

EXAMPLE#1 EXAMPLE#2 EXAMPLE#3

SALES $1.00

VARIABLE COSTS .60

CONTRIBUTION MARGIN

FIXED COSTS $12

SALES TO BREAKEVEN

WHATS THE FORMULA FOR BREAKEVEN?

BREAKEVEN =


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2013 7

WHAT DOES IT TAKE TO BREAKEVEN?

Now lets apply this to some real numbers.

SAMPLE COST STRUCTURE

SALES $1,200,000 100%

Less: VARIABLE COSTS 720,000 60%

Equals: CONTRIBUTION MARGIN 480,000 40%

Less: FIXED COSTS 400,000

Equals: PROFIT $ 80,000

What is the breakeven point for this business?

For every dollar in sales there is 40 cents (40% of a dollar) left after the variable costs are paid. This is the

contribution marginwhats left to contribute to paying fixed costs and profit. When all the fixed costs are

paid, you breakeven. So the question is, how many times must you earn 40 cents to cover $400,000 in

fixed costs?

Heres the formula:

Breakeven = Fixed Costs = $ 400,000 = $ 1,000,000

Contribution Margin 40%

In the example above, we actually had sales of $1.2 million or $200,000 more than breakeven sales. For

every dollar in sales that exceeded breakeven, we earned 40 cents in profit. Once all the fixed costs were

covered, the contribution margin went straight to the bottom line ($200,000 in sales after breakeven x40% = $80,000 profit).


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Breakeven pluswhat?Heres a review of how breakeven is calculated:

o Classify your costs as fixed and variable, then total each category

o Determine your variable cost percentage (variable costs divided by sales)

o Determine your contribution margin (100% minus the variable cost percentage)

Then youre ready to calculate Breakeven Sales:

Breakeven = Fixed Costs

Contribution Margin %

Fixed costs divided by contribution margin percentage

equals sales required to breakeven

Now lets get to breakeven plus! Find out the sales you need to make the profit you require:

Breakeven Plus= Fixed Costs + Profit Goal


HOW MUCH PROFIT DO YOU NEED?START WITH THE END IN MIND.

When youre using breakeven to set sales goals, treat your profit like any other cost. Profit is not optional.

You must earn enough in sales to cover it. How much profit do you need? Enough to

o Reinvest in assets

o Pay back debt

o Distribute money to owners

To set your profit goal, start by answering these questions:

WILL I NEED TO INVEST IN FIXED ASSETS?Are you planning to make store or facility improvements, expand, replace fixtures or equipment or make

an upgrade to your computer system? If so, how much money will you need? List the assets and estimate

their costs.


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WILL YOU PAY CASH FOR THE ASSETS OR WILL YOU GET FINANCING?

Remember the cardinal rule of finance match the life of the loan with the life of the asset. Assess your

financial condition and your cash flow situation and determine how much of the costs will be financed and

how much will be paid for with current operating cash flow.

HOW MUCH DEBT WILL I REPAY IN THE COMING YEAR?

How much will you pay down on the principal of your existing loans? List each loan you have along with

the scheduled principal repayment for the coming year. Then add repayments on any new borrowings

you would have if you plan to finance some of your asset purchases.

WHAT RETURN DO I EXPECT ON MY INVESTMENT IN THIS BUSINESS?

If youre working in the business, you should pay out a reasonable amount of compensation for the value

of the work youve done.As an owner, you should also expect to earn a return on your investment in thebusiness. Whether or not you intend to distribute earnings for yourself, it is important to set a goal for a

reasonable targeted return each year. What percentage of return is reasonable? Thats up to you.

Consider how much return you could earn if your money were invested elsewhere. Now consider that

high risk should demand higher return than safe, sure investments. What is a reasonable ROI for your

industry? What ROI do you expect? What distributions do you need to build your golden goose/nest egg?

The worksheet on the next page can help you to consider these factors as you organize your profit goal.

AND IF YOU DONT HAVE ENOUGH PROFITAll of the things you can do to l ift profits fall into one of these four categories:

o Reduce variable costs

o Reduce fixed costs

o Raise your selling price

o Increase volumesell more

Set your goal and then develop action plans that fit with these four strategies to raise profit.


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Profit goal worksheet

HOW MUCH PROFIT WILL YOU NEED?

Required reinvestment in assets + $ __________________

Less: Amount financed ( $ __________________ )

Plus: Principal payments to make on loans + $ __________________

Plus: Profit to distribute to owner (ROI) + $ __________________

Equals: Total Profit Goal = $ __________________

WHAT WILL YOUR COST STRUCTURE BE?

Estimated fixed costs for the year $ ___________________

Estimated contribution margin percentage for the year ___________ %

CALCULATE YOUR SALES GOAL

Fixed Cost plus Targeted Profit $ + $ = _____________________ $

Divided by Contribution Margin % Sales Goal

Recap the big pictureyour overall goal

GOAL

$ Amount %

Sales Goal

- Variable Costs (VC% x sales)

= Contribution Margin

- Fixed Costs

= Profit Goal


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will help you track the changes. So find out your magic number, and then check it regularly by using your

monthly profit and loss to recalculate your contribution margin.

BREAKEVEN AS A RECESSION MANAGEMENT TOOL

As sales drop, prudent managers attempt to trim expenses to preserve profit. You can use breakeven to

calculate how much cost cutting it takes to offset the lost sales. Your magic number can provide the

answer. In the earlier example, if sales drop by $2.50 we need to cut costs by $1.00 to weather the

downturn. If sales drop off by $2,500, you would need to cut fixed costs by $1,000 to sustain the same

profit you earned before. To find out your target cost reduction, divide the lost sales by your magic

number. This will calculate the reduction needed in fixed costs to maintain your existing profit dollars.

BREAKEVEN PLUS AS A PRICING TOOL

You can also use breakeven analysis to assess pricing decisions. Take this example where we cut our

price by 5%. Variable costs are the same in dollars, so they are now a higher percentage of sales. The

new cost structure looks like this:

SALESold pricing 1,200,000Less: 5% price cut - 60,000Equals: New sales 1,140,000 100%Less: VARIABLE COSTS -720,000 63% new variable cost %Equals: CONTRIBUTION MARGIN 420,000 37% new contribution margin %FIXED COSTS 400,000

Breakeven = Fixed Costs = $400,000 = $1,081,081Contribution Margin% 37%

Before the price cut we needed $1,000,000 to breakeven (page 5). After the price cut, we need to earn

$1,081,081. Thats an 8% increase in volume required if we cut price by 5%.

Old breakeven 1,000,000

Additional sales - 81,081 (*8% of $1,000,000)

Equals: New breakeven 1,081,081

If we increase our price by 5% the cost structure looks like this:

SALESold pricing 1,200,000Plus: 5% price increase + 60,000

Equals: New sales 1,260,000 100%Less: VARIABLE COSTS -720,000 57% new variable cost %Equals: CONTRIBUTION MARGIN 540,000 43% new contribution margin %FIXED COSTS 400,000

Breakeven = Fixed Costs = $400,000 = $930,232Contribution Margin% 43%


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Before the price increase we needed $1,000,000 in sales to breakeven (from Sample Cost Structure,

page 5). After the price increase, we need to generate $930,232 in sales. Thats a7% drop in volume that

could occur and still maintain the same profit if price is raised by 5%.

Old breakeven 1,000,000

Additional sales - 69,768 (*7% of $1,000,000)

Equals: New breakeven 930,232

BREAKEVEN UNIT ANALYSIS

Some businesses can measure sales activities in units, such as average invoice value, average

customer, hours billed, or the number of product units sold (such as tons of material sold). In these

instances breakeven can help establish targets for volume and costs on a per unit basis. Follow these

steps to determine the sales price per unit:

Step 1 Determine the average sales per unit

SalesNumber of Units = Sales per unit

Step 2 Determine the variable costs per unit

Variable CostsNumber of Units = Variable costs per unit

Step 3 Determine the contribution margin per unit

Sales per unit

- Variable costs per unit= Contribution margin per unit

Step 4 Calculate the number of units that must be sold to breakeven

Fixed Costs = Breakeven in unitsContribution margin per unit

This analysis can be especially helpful in assessing unit pricing.


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What does it take to breakeven?Terry acquired Metro City Rentals in 2003 after years as a successful sales rep for a major manufacturer.

With his industry knowledge and selling skills, the business grew rapidly. By 2006 he was driving sales

over $2 million. In 2007 sales began to fall off, and by 2009 he had lost 35% of his business. After some

years of losses Terry has now right sized his operation back to a profitable level.

He has come to you for help establishing a strategy to lift sales and profit. You decide to use breakeven

analysis to better understand the current situation. You have already classified his costs as fixed and

variable. Heres what you came up with.

Calculate Variable Cost Pct and Contribution Margin DEC. 31, 2013

$ Amount Pct of Sales

Sales $1,600,000 100.0%

Variable Costs 453,000 %

Contribution Margin 1,147,000 %

Fixed Costs 1,100,000

Profit $ 47,000

Your job now is to calculate the variable cost percentage and the contribution margin for 2013 and

then calculate the sales needed to breakeven:

What were the breakeven sales for 2013?

Calculate Breakeven DEC. 31, 2013

Fixed Costs


= Breakeven Sales $ =

%

$


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What sales will provide my Breakeven Plus?For 2014 Terry wants to earn a profit of $100,000. What will he need in sales, assuming his cost structure

will be the same as 2013?

HINT:PROFIT IS NOT OPTIONAL .TREAT YOUR TARGETED PROFIT AS A FIXED COST

THAT YOU MUST COVER.

DEC. 31, 2013


Sales $1,600,000 100.0%

Variable Costs 453,000 28.3%

Contribution Margin 1,147,000 71.7%


Profit $ 47,000


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What if I invest in fixed costs?DEC. 31, 2013

Sales $1,600,000 100.0%

Variable Costs 453,000 28.3%Contribution Margin 1,147,000 71.7%


Profit $ 47,000

Reminder:

Fixed CostsBreakeven Sales = Contribution Margin %

GIVEN THE 2013COST STRUCTURE SHOWN ABOVE,ANSWER THE FOLLOWING

DISCUSSION QUESTIONS

1. What additional sales are required to cover a marketing investment of $1,000?

2. What additional sales are required to cover additional costs of $100?

3. What additional sales are required to cover each dollar of incremental costs?


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How many orders/units?We can also calculate breakeven on a unit basis. Think of an average ticket price or job order as a unit of

measure. For 2013, Terry had 800 jobs. Heres how the cost structure per order looks for Terrys

business.

Reminder:

Fixed CostsBreakeven Sales = Contribution Margin per Unit


1. Calculate the number of sales orders needed to breakeven.

2. How many sales orders would it take to cover the costs of an additional sales person who earns$40,000 per year?

3. Calculate the number of sales orders needed to achieve a profit of $100,000.

2013 ACTUAL

$ Amount % $ Per Order

Sales $1,600,000 100.0% $ 2,000

Variable Costs 453,000 28.3% $ 566

Contribution Margin 1,147,000 71.7% $ 1,434


Profit $ 47,000


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What if the average ticket price improves?


1. How many orders does it take to breakeven if Terry raises his price by 10% across the board?

2. How many orders does it take to breakeven if Terry implements a 10% across the board pricecut?

3. How many sales tickets does it take to breakeven if Terry sold $200 more to each customer?Assume the additional sales are made at the same overall margin/variable costs as the 2013average sale.

4. What issues should you consider when deciding whether to lower price to gain more marketshare?

5. Name some ways you could raise your average ticket price:

2013 ACTUAL10% PriceIncrease

10% PriceCut

$200 Upsell

$ Amount % $ Per Ticket $ Per Ticket $ Per Ticket $ Per Ticket

Sales $1,600,000 100.0% $ 2,000 $ 2,200 $ 1,800 $2,200

Variable Costs 453,000 28.3% $ 566 $ $ $

Contribution Margin 1,147,000 71.7% $ 1,434 $ $ $


Profit $ 47,000


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100% - Variable Cost%$1

ContributionMargin %

Variable CostsSales

Want to improve your profit-makersintuition?

Track these figures each monthand know your break even point in dollars and in units (such as number of

customers, average job, etc.):

$ Amount % of Sales $ Per Unit

Sales $ % $

Variable Costs $ % $

Contribution Margin $ % $Fixed Costs $

Profit/(Loss) $

Number of Orders/Jobs

Breakeven in Dollars Fixed Cost Contribution Margin %

Breakeven in Units Fixed Cost Contribution Margin Per Unit

BRIDGETO MY BUSINESSTHINK ABOUTYOUR COST STRUCTURE

List your variable costs:

% % $


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HOW CANYOU USE BREAKEVEN ANALYSIS INYOUR BUSINESS?

In this session we practiced using breakeven analysis which can be used to help with these types of

decisions:

o Set a sales goal to achieve a targeted profit

o Establish pricing models, schedule price increases or decreases

o Assess impact of rent increases due to lease terms, renewals or relocations

o Add an employee

o Assess staff wage increase

o Add equipment or other cost

o Consider possible reactions to shrinking markets

o Determine cost controls needed to offset lost sales

o Anything else?

Which of these decisions are issues you will deal with in the next 90 days?

BRIDGE TO MY BUSINESS


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COMPLETED SOLUTIONSWhat does it take to breakeven? (page 14)

Your job is to calculate the variable cost percentage and the contribution margin for 2013 and then

calculate the sales needed to breakeven:

Calculate Variable Cost Pct and Contribution Margin DEC. 31, 2013


Sales $1,600,000 100.0%

Variable Costs 453,000 28.3 %

Contribution Margin 1,147,000 71.7 %


Profit $ 47,000

What were the breakeven sales for 2013?

Calculate Breakeven DEC. 31, 2013

Fixed Costs


= Breakeven Sales $ 1,100,000 =

71.7% (or .717)

$ 1,534,170

PROOF:IF SALES HAD BEEN $1,543,170 THEN

$ Amount %

Sales $1,534,170 100.0%




Profit $ 0


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What sales will provide my Breakeven Plus? (page 15)

For 2014 Terry wants to earn a profit of $100,000. What will he need in sales, assuming his cost structure

will be the same as 2013?

HINT:PROFIT IS NOT OPTIONAL .TREAT YOUR TARGETED PROFIT AS A FIXED COST

THAT YOU MUST COVER.

Breakeven Plus= Fixed Costs + Targeted ProfitContribution Margin %

$1,100,000 + 100,000 = $ 1,673,64071.7% (or .717)

PROOF:

DEC. 31, 2013


Sales $1,600,000 100.0%




Profit $ 47,000

IF SALES HAD BEEN $1,673,640 THEN

$ Amount %

Sales $1,673,640 100.0%




Profit $100,000


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What if I invest in fixed costs? (page 16)

DEC. 31, 2013

Sales $1,600,000 100.0%




Profit $ 47,000

Reminder:

Fixed CostsBreakeven Sales = Contribution Margin %

GIVEN THE 2013COST STRUCTURE SHOWN ABOVE,ANSWER THE FOLLOWING


4. What additional sales are required to cover a marketing investment of $1,000?

Add it ional Sales Required = Add it ional Fixed Costs

Contr ibut ion Margin %

$1,000 = $1,395

71.7% (or .717)

5. What additional sales are required to cover additional costs of $100?

Add it ional Sales Required = Add it ional Fixed Costs

Contr ibut ion Margin %

$100 = $139

71.7% (or .717)

6. What additional sales are required to cover each dollarof incremental costs?

$1 = $1.39

71.7% (or .717)

For every dollar of additional fixed costs, youll need to earn $1.39 in additional revenue just to coverthe cost.


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How many jobs/units? (page 17)

We can also calculate breakeven on a unit basis. Think of an average order or job as a unit of measure.

For 2013, Terry completed 800 jobs. Heres how the cost structure perjob looks for Terrys business..

2013 ACTUAL

$ Amount % $ Per Job

Sales $1,600,000 100.0% $ 2,000

Variable Costs 453,000 28.3% $ 566

Contribution Margin 1,147,000 71.7% $ 1,434


Profit $ 47,000


1. Calculate the number of jobs needed to breakeven.

Fixed Costs = Breakeven in units

Contr ibut ion margin per uni t

$1,100,000 = 767 Unit s (Job s per year)

$1,434 per unit

2. How many jobs would it take to cover the costs of an additional sales person who earns $40,000 peryear?

. Fixed Costs = Breakeven in unitsContr ibut ion margin per uni t

$40,000 = 28 Units (Job s per year)

$1,434 per unit

3. Calculate the number of jobs needed to achieve a profit of $100,000.



$1,100,000 + $100,000 = 837 un its (Job s per year)

$1,434 per unit


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What if the average job amount improves? (page 18)

DISCUSSION QUESTIONS1. How many jobs does it take to breakeven if Terry raises his price by 10% across the board?




$1,634 per unit

Prior Breakeven 767 Job s

New Breakeven 673 Job s

Volume reduct ion 94 Fewer Jobs

94/767 = 12% fewer jobs to breakeven with 10% lift in price

2. How many jobs does it take to breakeven if Terry implements a 10% across the board price cut?

$1,100,000 = 892 Units (Job s per year)

$1,234 per unit



Addi t ional volume 124 Addi t ional Jobs Needed

124/767 = 16% more jobs to breakeven with 10% price cut

3. How many jobs does it take to breakeven if Terry sold $200 more to each customer? (Note:

assume that the additional sales are made at the same overall margin/variable costs as the 2013average sale.)




$1,577 per unit

2013 ACTUAL10%Price

Increase

10%Price Cut

$200Upsell

$ Amount % $ Per Job $ Per Job $ Per Job $ Per Job

Sales $1,600,000 100.0% $ 2,000 $ 2,200 $ 1,800 $2,200

Variable Costs 453,000 28.3% $ 566 $ 566 $ 566 $ 623

Contribution Margin 1,147,000 71.7% $ 1,434 $ 1,634 $ 1,234 $1,577


Profit $ 47,000


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Volume reduct ion 70 Fewer Jobs

70/767 = 9% fewer jobs to breakeven.

Upsell existing jobs by 10%. No price increase or decrease.

4. What issues should you consider when deciding whether to lower price to drive more marketshare?

Consider customers perception of your current market position. Are you priced h igh or lowcompared to the market? If high, you may be losing more sales than you think.

What can you do to reduce costseither fixed or variableto offset the lost margin?

Dont just cut prices across the board. Identify which products you need to be pricecompetitive with, and which can hold higher margins.

When selling, emphasize the value of higher quality, less price sensitive products in contrastwith corresponding entry level, more price-sensitive products.

Cut price on entry level products and then up-sell to better quality, higher margin items ifpossible.

Enhance selling skills of account managers so they can effectively migrate customers fromentry-level price sensitive lines to better margin products.

5. Name some ways you could raise your average job amount:

Raise Price Expand range of services or products offered to include higher-priced items

Expand range and/or selling skills so you can up-sell add-ons or upgrades Give high value service so price is not an issue

Focus market development efforts with customers who support your higher-margin lines

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10am-Driving Profit With Purpose