Subtraction Equals Addition

There’s a trainer at my gym who says abs are built in the kitchen.

I believe him. I just don’t particularly enjoy his advice.

Many of us—myself included—would rather work out more than eat less. But eventually, the math catches up with us.

The same is true in business.

Seventy-seven percent of merchants track sales and revenue, but fewer than half track profit margin.

Every business owner learns this eventually:
Revenue does not equal profit.

I have valued businesses that grew from $10 million in revenue one year to $30 million the next—while the bottom line barely moved. More sales. More employees. More equipment. More complexity. But not more profit.

How you generate revenue matters. Revenue tells you what customers are buying. Profit margin tells you whether selling it is actually worth it.

Here are three questions worth asking.

Suppose your company generates $2 million in annual revenue with an 8% profit margin. That produces $160,000 in profit.

Improve the margin to 10%, and profit increases to $200,000.

You just added $40,000 to the bottom line—without making another sale.

Sometimes the greatest opportunity is not finding more revenue. It is keeping more of the revenue you already have.

Not the product with the most sales.

The one with the strongest margin.

Can you sell more of it? Can you pair it with a complementary, lower-margin product to increase the profit from each transaction?

Imagine you sell coffee online. Instead of shipping a bag of beans by itself, bundle it with an AeroPress. Shipping the products together may cost less than fulfilling two separate orders.

Now you have room to offer the customer a package deal while still earning more profit from the transaction.

The goal is not simply to sell more products.

It is to increase the value, and profitability, of every order.

Margin rarely disappears all at once.

It leaks out quietly:

• Unnecessary discounts
• Unbilled time or materials
• Overtime and scheduling inefficiencies
• Vendor price increases that never make it into your pricing
• Waste, spoilage and rework
• Credit-card and delivery fees
• Slow-moving inventory
• Customers or jobs that consistently exceed estimates

Individually, these may feel insignificant. Together, they can quietly consume a meaningful portion of your profit.

So, the question today is simple:

What could you subtract from your business to add to your bottom line?