By Tyler Garrett, executive assistant to Randy Russon, founder of TOP CFOS
Most businesses operate with very high efficiency. With just the right degree of work, they’re able to generate an impressive cash flow and maximize their returns on investments. Though, what most businesses aren’t aware of is that they usually have thousands and thousands of dollars sitting around in hidden profit centers.
Here at TOP CFOS, we come across hidden profit centers all the time. In fact, finding the hidden profit centers in your business is our job! As clients have followed through on our expert financial advice, they’ve been able to discover the hidden goldmines beneath each of their businesses.
There are many examples to draw upon, but we’ll share one: One day, Randy was invited to analyze the books of a large shoe store. The owners had nearly twenty employees, and they had been in business for over fifteen years. They were averaging $1,500,000 in gross sales per year. The first thing Randy did was look back five years to see what was happening with their income statements.
When looking at income statements, doing a trend analysis is very beneficial because it tells the story of where the company has been and usually where they are headed. This business in particular had a very healthy sales trend that was increasing every year. Randy then looked at their gross profit over the past five years and noticed a spike in 2009. He noticed in that same year that their selling expenses were way below every other year. At this point, he was very curious about the year 2009. Finally, he looked at their net income for 2009, and there was the goldmine: their net income was over $200,000 for that year!
During the previous year and all subsequent years, their net income was about half or less than this particular year. So, Randy turned to the owners and asked what happened during 2009. They thought for a minute and then she said, “Oh, that’s right, my son took over the business that year and was blowing merchandise out the front door the entire year!” Turns out that the son was offering all kinds of discounts to customers on merchandise. Here was the key. Randy said, “Isn’t it about time you repeated this?” They said that they had wanted to sell everything at full retail value, but they eventually saw the wisdom in accepting Randy’s advice.
At TOP CFOS, stories like these are very common. Every business has some sort of hidden profit center that they’re sitting on, so why not let us help you discover them? The rewards are tremendous, and with a free initial consultation, you have nothing to lose, but everything to gain.
We hope you’ve enjoyed our blog. Remember, TOP CFOS offers the finest CFO services to companies that want to take their businesses to the top. We love being the catalyst behind firms’ soaring profits, and we’d love to be a part of your team. Our contact info can be easily found on our website, so feel free to reach out anytime.
Our next post will come from the Leadership category and is titled “Why Everyone Needs CFO Services.” Thank you for joining us!
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