Channel Eye has joined forces with Royston Guest, leading Business Growth Coach and CEO/Founder of Pathways Global, in our series, ‘Ask the Business Coach’.
Revenue may be increasing, the pipeline might appear healthy, and the team may be busier than ever – yet the net profit tells a different story. Falling short on net profit signals that something more fundamental requires attention, whether it’s pricing, cost control, efficiency, or something more strategic.
Understanding your net profit figure is essential before it becomes a costly illusion.
Three key takeaways
- Gain a deeper understanding of how you make a profit.
- Shift your focus to gross profit.
- Know your direct cost of sales.
Episode timestamps
- [0.45] Focusing solely on net profit is a lag indicator. It reflects past actions. You need to look further upstream to understand what influences your net profit.
- [1.45] Focus on gross profit. Use this formula to measure it: Sales price – direct cost of sales = gross profit. First, understand your pricing strategy (sales price), then determine the direct costs involved in delivering those sales. Subtracting the direct costs from the sales price gives your gross profit.
- [5.15] Understand your gross profit and your overheads; these two figures help you determine your net profit.
- [5.40] Download my new report, Seven Fatal Mistakes to Avoid When Growing and Scaling Your Business – one of which is focusing too much on net profit.
Do you have a question for the Business Coach?
Send your questions to [email protected]
Missed a previous episode? Catch-up and watch the series here.
