You are starting out in the business industry and have a BRAND NEW business but you have no real idea how to structure it to generate a high amount of profit or how to get it generating profit at all.
I will present to you what I like to call the 3% rule that will absolutely CHANGE the way you view business & how you act with numbers! So what is the 3% rule?
Increase prices by 3%
When increasing your prices by 3% of the original price, it will be settle enough to not disrupt any flow of movement but also impactful enough to where it will make a difference in the total revenue and total profit at the end, after subtracting all expenses. Now you must be questioning the following discussion, when is the right time to increase prices? The best time to increase prices is when the business will recieve the least amount of resistance. A business has different cycles of sales and seasons. For example, restaurants in Florida have higher sales revenue in the months mid October to late March due to “snow bird season”. That being said, the northerm side of the states have a lower sales revenue due to the higher percentile migrating for the winter. So for the northern side, its highest sale revenues would be from April to early October.
Decrease direct costs 3%
Direct costs can be lowered in a variety of different ways. The first main way is by reducing employee turnover. Often times in businesses, there are excess employees when not needed. Instead of having extra employees on the payroll that are not needed, focus on having a stable group of employees that are highly effective. Another highly effective way to cut direct costly expenses is by wisely choosing your supply vendors. Often times, larger traditional office supply vendors have higher cost prices in comparison to Amazon per say.
Deals for customers to buy 3% more in sales
Promotional deals are highly effective for customers. A customer will often times spend more by seeing small add on enhancements. Such as a $5 recycle grocery bag at Whole Foods. Low add on enhancements are a phenomenal way to get a costumers attention in line to check out and make another sale!