This page contains a Flash digital edition of a book.
BUSINESS COACH


Before: This calculation shows a standard product mix resulting in a 44.6-percent Gross Margin.


Let’s talk about something that is fun. Here’s profit-boosting strategy #3 — the easiest and most effective way I know to improve profitability…


3. INCREASE GROSS MARGINS


Gross Profit (GP) is the No. 1 most important number in your business. Nothing will do more to improve your profitability than increasing your Gross Profit. • You can increase GP by selling more, at the same margin. Or… • You can increase GP by selling the same, or even less, at a higher margin. GP is measured in dollars. Gross Margin — GM — measures GP as a percentage of sales. The distinction is important. A $600 display at 20% GM delivers $120 GP. That’s the same GP as a $300 head unit at 40% GM. Or $200 worth of high-end speaker wire and cables at 60% GM.


Optimizing Gross Profit is all about delivering the right mix of low vs. high GM prod- ucts. It is best illustrated by something I call the Mix|Margin Matrix.


THE MIX|MARGIN MATRIX Each of the products you sell likely fall into one of three GM Categories… Low GM — 20% or less Good GM — 21% to 40% High GM — over 40% A fourth category, Labor, is unique. In the Top-Line Management System (TLM)*, labor services are included in total sales at a 100% GM; pure GP


. Companies operat-


ing under TLM strive to get as much labor billed as they possibly can. But there’s GP in the boxes, too — the real key is managing your sales mix to in- clude a good percentage of each of these categories. Here’s how the Mix|Margin Matrix might look for a 12V retailer… While a 44.6% top-line GM might sound good, the objective is to make it better. The chart above illuminates several potential improvement strategies. This business owner could: • Increase labor mix. The TLM method is to measure labor as a % of the job total. Increasing mix thus means charging more for labor, relative to the cost of the gear. You might have to bump your established flat rates, and/or your hourly rate. If you


After: By increasing sales of accessories and installation parts, labor and higher-end speakers, the GP and GM go up even with a drop in core component sales.


44 Mobile Electronics December | January 2012


Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7  |  Page 8  |  Page 9  |  Page 10  |  Page 11  |  Page 12  |  Page 13  |  Page 14  |  Page 15  |  Page 16  |  Page 17  |  Page 18  |  Page 19  |  Page 20  |  Page 21  |  Page 22  |  Page 23  |  Page 24  |  Page 25  |  Page 26  |  Page 27  |  Page 28  |  Page 29  |  Page 30  |  Page 31  |  Page 32  |  Page 33  |  Page 34  |  Page 35  |  Page 36  |  Page 37  |  Page 38  |  Page 39  |  Page 40  |  Page 41  |  Page 42  |  Page 43  |  Page 44  |  Page 45  |  Page 46  |  Page 47  |  Page 48  |  Page 49  |  Page 50  |  Page 51  |  Page 52  |  Page 53  |  Page 54  |  Page 55  |  Page 56  |  Page 57  |  Page 58  |  Page 59  |  Page 60  |  Page 61  |  Page 62  |  Page 63  |  Page 64  |  Page 65  |  Page 66  |  Page 67  |  Page 68