During the Great Recession, most companies went through intense belt-tightening to survive. As we begin a recovery, it's tempting to breathe a sigh of relief and loosen that belt. But, increasing sales will be all for naught if expenses go up hand-in-hand with increasing sales. Here's a simple illustration that brings home the impact of sales and expenses on your bottom line. Assuming you have a 5 percent profit margin, only a nickel of every dollar in sales "drops" to the bottom line as profit. But if you cut a dollar from expenses, the entire dollar drops to the bottom line. Keeping this in mind is critical if profitablity is going to be maintained for any business, whether it's in a recession or a recovery.
- Kim Wahlgren
- January 28th 2013
- Published in February/March 2013 Issue