Most small business owners figure out the price they need to sell a product and be competitive in the market, then subtract their expenses hoping to make a profit if they do everything really well. What if you turned it upside down and became intentional about making profit? Set your selling price, subtract your desired profit first, then subtract your expenses? Too often I meet with business owners that build a business model based on what they need to get done vs. building a model designed to intentionally make a profit. If you subtract your profit first, you know exactly how much you can spend to produce or bring a product to market. Would you have to do things differently? Would you have to be more creative to accomplish everything? Henry Ford said, “Whether you think you can, or you think you can’t — you’re right.” Either way it’s a great exercise, all you have to lose is improving and becoming intentionally more profitable.
Jeff is a FocusCFO Area President based in Akron, OH.