301.363.2360
GetResults@ResultsCFO.com
  • Home
  • Our Approach
    • Our Approach
    • Who We Serve
    • Our Process
    • Our Philosophy
  • Services
    • CFO
    • MVB Coaching
    • Accounting Department
  • Blog
  • About Us
    • Mission and Vision
    • Who We Are
    • Our Team
    • Join Our Team
  • Contact
  • Videos
  • Resources
    • COVID-19 Resources
  • Home
  • Our Approach
    • Our Approach
    • Who We Serve
    • Our Process
    • Our Philosophy
  • Services
    • CFO
    • MVB Coaching
    • Accounting Department
  • Blog
  • About Us
    • Mission and Vision
    • Who We Are
    • Our Team
    • Join Our Team
  • Contact
  • Videos
  • Resources
    • COVID-19 Resources

Mix Up Your Revenues for More Profits

March 25, 2021 In Blog, Profitability Tips
Tweet
Share
Share
Pin

Many small business owners focus on generating more revenue every year, and that’s a wonderful goal.  But not all revenue is created equally since some items are more profitable than others.  If you sell more than one product or service in your business, then you may benefit from looking at your revenue mix. 

While it’s fun to watch revenues grow, your business profit is what really matters.  If your expenses grow faster than your profits, then you have a lot of activity going on, but you don’t get to keep as much of what you make.

An insightful exercise to try is to take a look at your revenue mix.  Then you can ask “what if?” to optimize your profits. 

Your Revenue Mix

Let’s say you offer three different services: Services J, K, and L. Your revenue pie looks like this:

J:  $700K or 70% of the total
K:  $150K or 15% of the total
L:  $150K or 15% of the total
Total:  $1.0 million

In this example, Service J is clearly the service making you the most revenue in your business.  But is it making you the most profits? 

The profit you receive from each of these service lines is as follows:

J:  $80K
K: $10K loss
L:  $30K
Total:  $100K

While Service J is generating the most profit volume for your business, it’s actually Service L that’s the most profitable.  Earning $80K on $700K yields 11.4% return on Service J, but earning $30K on $150K yields nearly double the return at 20%.  Service L generates the most return.   And if possible, Service K may need to be discontinued or turned around. 

Optimizing Profits

Your strategy for a more optimum revenue mix might be to sell as much of Service L as possible, while eliminating or fixing the problem around Service K. 

It’s fun to experiment with different revenue mixes.  And of course, there are many more variables besides profit, such as: 

  • What services/products do you prefer to work on/sell?
  • Are you able to sell more of the most profitable service or are there marketing limitations?
  • Is one service a loss leader for the others?
  • Are you able to adjust price on the lower margin services to increase your profits? 

There are many more questions to ask and strategies to consider to make you more money, which is why we love being accountants.

A New Mix

We hope you’ll spend some time analyzing your revenue mix and having fun asking yourself “what if?”   If we can help you expedite the process or add our perspective, please reach out anytime.

Tweet
Share
Share
Pin

Monthly Archives

Categories

  • Accounting (24)
  • Accounting Software (3)
  • Blog (10)
  • Bookkeeping (1)
  • Bookkeeping Tips (5)
  • Business Development (12)
  • Business Growth (9)
  • Business Tips (64)
  • Cool Tech Tools (13)
  • Cost-Saving Tips (1)
  • Cost-Savings Tips (1)
  • Customer Service Tips (7)
  • Decision-Making Tips (2)
  • Expense Reduction Tips (4)
  • Finance Management (1)
  • Management Tips (10)
  • Marketing Tips (1)
  • Money Management (2)
  • Payroll Tips (3)
  • Personal Development (5)
  • Profitability Tips (11)
  • Tax (5)
  • Time Management Tips (4)

Sitemap

  • Home
  • Our Approach
  • Services
  • Sign Up For Our Newsletter
  • Blog
  • About Us
  • Contact

Contact Us

Accounting, CFO and Coaching services

RCFO, LLC

7200 Wisconsin Ave
Suite 500
Bethesda, MD 20814

Phone: 301.363.2360
Fax: 301.363.2350
GetResults@ResultsCFO.com


Intuit, QuickBooks, and QuickBooks ProAdvisor are registered trademarks of Intuit Inc. Used with permission under the QuickBooks ProAdvisor Agreement.

Copyright RCFO, LLC 2020 | Site Design by Accelerator Websites