DiSabatino CPA Blog

DiSabatino CPA Blog

A blog by Michael DiSabatino CPA with topics on Tax Savings, Business, Management and more...

Use the 80-20 rule to increase your business profits

Use the 80-20 rule to increase your business profits

How well do you know your customers? Which ones are the most profitable? Which ones take most of your time? It's worth taking the time to find out. If your business is like most, the 80-20 rule applies. That is, 80% of your profits come from 20% of your customers.

If you can identify that top 20%, you can work hard to make sure this group remains satisfied customers.

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Will business growth bring more profits?

Will business growth bring more profits?

My business has not been growing but it seems as though I add more people and equipment without increasing my net profit. What am I doing wrong?

Answer: Let's see what happens in a typical company as the business grows. Suppose that a company is netting $50,000 on total sales of $1,000,000 (a 5% net profit). If this company has a 40% gross profit (on items sold), a $100,000 increase in sales should add $40,000 to the bottom line. I say "should" because the increase in sales may cause the need for more equipment, space, or inventory.

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