Increase Sales Blog

Posts Tagged ‘cannot outgrow losses’

All businesses be them for profit or not for profit have overhead.  For single office/home office (SOHO) and independent contractors including realtors, financial advisors, lawyers, accountants (CPAs) this budgetary and financial number is much easier to determine than for the small business owners with employees and the much larger companies where it exists, but no one department wants to own even a part of it because it reduces profits within that department.

A recent post in the COO Bulldog by Kevin Callahan provided a simple explanation as how to calculate and subscribe overhead costs to employees. His last point reaffirms what Gary Sutton talked about in his book Corporate Canaries specific to you cannot outgrow losses.

Operating a business can either be from a short term or long term perspective.  Data from the Small Business Administration suggests many small business owners appear to operate from a short term perspective given by year five, 50% of these organizations are not longer viable.  By not understanding and properly allocating overhead can contribute to this small business failure rate.

One other variable in this mix is this one word – value.  The inherent value within your products and services can help you in your overall pricing structure.

By knowing and being able to clearly articulate this value to your customers should allow you to raise your prices or sell more of your products and services at their existing price levels while building customer loyalty.  Then provided you maintain your overhead costs along with direct costs because you cannot outgrows losses you should be able to increase your profits and not be constrained by your losses. Bottom line is you will then be the Red jacket in both sales and profits.

As always, please feel free to leave your companies or observations about the importance of this business practice.