What would happen if you didn’t change the oil in your car?
It would start to run like crap and, eventually, cause damage to your engine.
You and I know that it’s critical to maintain our vehicles by changing the oil or else we’ll have a burnout engine. With that in mind, let me ask the next question.
What would happen if you didn’t perform a profitability analysis on your business.
It would run like crap and, eventually, cause damage to your business.
You know it’s important to perform routine maintenance on your vehicle and the same principle applies to your business.
When you need an oil change, you bring it to the mechanic/shop. You trust an expert to take care of that for you. Let me share what a profitability analysis is and why you should trust an expert to walk through this process for you. It could change your business and result in reaching your biggest business goals.
Ready?
What is a Profitability Analysis?
When I work through this process with clients, I look over all their business financials and ask some simple questions to paint a picture of where your business is today.
I look at the following -
Your gross revenue
Overhead costs
Cost of goods sold
Your business compared to the competition
And more
Basically, I want the breakdown of what’s coming in, your costs, and understanding your business needs. I need a complete understanding of your business financial position to evaluate if we need to recalibrate and the only way I can achieve this is by holistically looking into your financial statements and underlying data.
How Does a Profitability Analysis Help Businesses Grow
I thought the best way to illustrate how a profitability analysis can help your business grow is by sharing four examples of applying this to a business.
1. Recently, I reviewed a profitable business that has one line of business dragging the entire business down. I was able to share data with the client that proved eliminating that line of business would boost overall profitability.
2. One client had what looked like a ridiculously high cost of goods sold (COGS), but in reality, their industry experiences even higher COGS rates and this client was performing well compared to the competition.
3. I was able to help a business examine their numbers and realize they were spending far too much on overhead costs. With a few adjustments, their profits were boosted.
4. Businesses need to know if they can cover their tax liability. One of the best ways to have confidence in your ability to pay taxes is through a profitability analysis. By looking at all of their financial statements, I’m able to determine whether they’re well prepared for tax season and to help them adjust if they aren’t. There is power in the numbers!
Looking for a Profitability Analysis?
Just like with your regular oil changes, a profitability analysis is a critical part of your business maintenance. This process can result in hundreds to thousands of dollars back into your profits. Find a trusted partner to deep dive into your financials and offer a clear picture of your profitability. Schedule your free call with me today.
