We are delighted to announce today our very first guest blog post from Jake Willott, a smart business owner who wanted to contribute to the Being Smarter community… Take it away Jake.
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Mark-up and Gross Margin are two different beasts
A clear understanding and application of the two within your pricing model will have a drastic impact on the bottom line.
Mark-up is the percentage difference between the actual cost and the selling price
£90 x 25% = £112.25
Gross margin (or gross margin) is the percentage difference between the selling price and the profit. Profit/Sales Price.
£22.50/£112.50 = 20%
These two definitions are extremely important because gross margin directly tells us how many of our £’s from sales are profit.
It is easy to make the mistake in thinking that if a product is marked up by 25%, the result will be a 25% gross margin on the income statement. However, a 25% mark-up rate produces a gross margin percentage of only 20%. By targeting the gross margin percentage vs the mark-up percentage, businesses in general can add an additional 5% profit to the bottom line.
A worked example:
If you increased the selling price of a product by 5% the figures then look like:
Buy at £90 sell at £120. £30 profit (or 25% gross margin)
Increase sale price by 5%. £120 x 1.05 = £126
The cost to us remains the same so the gross profit is now £36 and gross margin is 28.5%.
So the gross margin has gone up by 3.5%, which as a percentage of the starting 25% is an increase of 14%
So for a 5% increase on the selling price we’ve gained a 14% increase in gross margin.
Even better, let’s look at the cash profit. You were making £30 on the sale, now you’re making £36 – an extra £6. As a proportion of our initial £30, that’s a 20% increase.
A 20% increase in cash for a 5% increase in sale price.
The reason this happens (if you’re still here) is that any improvement in gross margin % is multiplied by the turnover.
In summary:
Figure out who your most profitable customers are, and we can only know that if we measure using the correct metrics.
And a small change in selling price has a large effect on increasing profit.
Jake Willott is the MD of Computer Medicine
The computer people who come to you
www.computermedicine.co.uk
5 ways to recruit smarter
in Get organisedMy wife is recruiting like crazy at the moment and I feel her pain… she works for a large corporate and the red tape around the recruitment process is a total nightmare. Of course it has to be done fairly and correctly, but it got me thinking that there must be a better way.
We’ve compiled a top 5 thoughts on how to recruit smarter. If you would like to add to the list – feel free below.
1) Is it time to ditch interviews?
How much can you really tell about someone in an hour’s interview? What if they interview badly and are plain nervous? What if they turn up 10 mins late because of a traffic jam, but interview really well? You then face a big dilemma.
As ever the marvellous Seth Goddin has some thoughts on this subject. I wholeheartedly agree with his approach, because I’ve done it!
2) Look online – but not the way you think
There are a number of fascinating stories around how people have been proactive online to secure their next dream role – so why not take advantage of the creativity which is out there and go search them out. Assuming you are looking for a dynamic, innovative, creative think outside of the box type of person, reach for the Google button. BUT whatever you do – don’t go near a jobsite. Instead use some of the keywords you associate with the job and see who crops up.
One of the fascinating stories we’ve found is Steve Chazin. He was made redundant from Apple, having spent nearly 10 years there. Instead of following the traditional path, Steve started a blog and wrote the e-book, Marketing Apple. He now does his dream consulting job, all because people found him as opposed to him finding them.
3) Generation Y – know your audience
Recruiting is a two way process – your candidate needs to actually like the look of your business and want to work there. Think about that as they sit across the table from you (assuming 1 doesn’t apply). Generation Y expects a lot. They want to know that your business is forward thinking. They want to know there’s opportunity. Most importantly they need to know they are going to like YOU. So sell yourself during the interview process. It’s like buying a house – ask yourself how gutted you would be if you lost that person to the competition.
The excellent folks at Tomorrow Today talk about this a lot. Here they talk about the war for talent.
4) Think about the cost of recruitment
Not something you necessarily think about, however if Microsoft can reduce their recruitment costs – you can too.
5) References
Be very sceptical of anyone who can’t provide a reference with a phone number. Where policy allows, ALWAYS call a reference before any offer of employment is made. It’s amazing the number of people who a) don’t bother and b) rely on written references. In 1 minute we’ve just found a dozen sites offering fake references, which we’re certainly not going to link to here!
Have a list of questions in advance and CALL at least one person. Doing that will be far more enlightening than requesting three written ones.
BONUS POINT
If you come across someone during the recruitment phase who clearly needs advice on how to come across at interview. Be a good citizen and point them at this Selling Yourself resource.
Happy recruiting.
Related articles
Is your company outofdate like these five huge European businesses?
in Get organisedEveryone has pet hates don’t they? Well one of mine is to see websites and other marketing collateral showing copyright dates with anything other than the current year. This becomes even more tiresome when you’ve actually informed the owner (who you know!) and they still don’t change it! (The two companies I’ve talked to in the last month shall remain nameless).
It’s got me thinking – why does it bother me so much – and does it bother anyone else? It bothers me simply because of my expectations around the speed of information change online. If someone hasn’t posted on a blog for a month, you assume the site is out of business… if someone is quoted in an article with a date from more than six months ago – you start to assume that they couldn’t get anyone better… We are all starting to demand real-time information – anything more than a few hours old is simply not uptodate enough. Am I being fair?
So back to the copyright thing. If you discover a new site and are wondering whether it is authorative – look for the copyright notice – is it showing this year? If not – vote with your feet – the owner hasn’t bothered to update it – the information is probably out of date. I’ve just done my own (very random) little survey (which took around 15 mins) and would suggest the following site owners take a look at the following:
All the above are top European companies, who almost certainly employee dozens of people to run their websites. How are you faring?
Stop getting distracted!
in Get organisedIt’s so easy to become distracted from your working day with the browser constantly open and the Internet always available to you. Leaving your Outlook client on all day is another massive distraction too – which is another story. Turn that off straight away!
If you are looking for ways to be smarter when it comes to putting some focus on your day, Read it Later could be a handy little application for you to know about. In short, it stops you from becoming distracted from what you were doing, without losing a piece of useful information, which could just disappear into the ether.
Read it later is a simple, free application, which has just had its second birthday and comes in three flavo(u)rs – Firefox, Iphone, or any other browser. You are surfing away – trying hard to meet a deadline, and of course you become distracted by an unrelated blog post or other snippet of information that suddenly takes you completely away from what you were trying to achieve originally.
Get into the habit of clicking the Read it later button, which installs into your browser… stop being distracted! What will then happen is that Read it later will file away the URL you were just going to look at for easy access later. You can continue to focus on what you were doing – safe in the knowledge that during you allotted ‘follow up’ or ‘spare’ time even – you can go back and examine the link…
Reading your filed away URLS…
If using Firefox, you can click on the ReadItLater dropdown on the right of Firefox’s search box to expand the list of items you’ve added. ReadItLater conveniently sorts the links by oldest added (you can change this), so you see the stuff that’s been hanging out there the longest at the top. You can quickly filter the list by tag, page name, site, or URL, too.
One of the really cool features of ReadItLater is that it automatically saves links to your Firefox bookmarks in a folder you specify. So if you’re already syncing your bookmarks across computers, your reading list goes to other computers.
In addition – at Being Smarter, we send the list to an RSS feed, which we can then view in Google Reader when time allows.
This is an excellent recommendation for business people serious about putting more focus into the day. It’s a great habit to get into reaching for that Read it Later button…
Demo for you below if you like the sound of it… watch it and then go and be more focused… like its million other users!
http://readitlaterlist.com
Do social networking applications have ANY place in business?
in Get organisedWe are pleased to announce our second guest blogger signing to the Being Smarter blog – from a CEO who’s company is all about helping businesses to become smarter. Aaron McCormack is the CEO BT Conferencing and will be joining us regularly with his thoughts on being smarter in business.
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So who gives a @$£%@ about the Tweeting and Blogging and Facebook updates of anyone, when we all have jobs to get done? I was much quicker to adopt social networking tools in my personal life. Although many Facebook friends are now professional contacts and it is hard to tell the difference nowadays.
Even Twitter (the “domain of twits” I used to say) has recently become an entertaining place for me (@aaronirish) following the updates from all the various riders in the Tour de France (#tdf)
There is a view that companies enabling social networks for internal use will simply end up helping their people spend more hours gossiping and sharing pictures online, rather than helping people get things delivered.
I tend to agree.
Many of my colleagues disagree. They think that corporate social networking tools (those we know, and some that are yet to be invented) will be the way that people do business going forward. People point to the way that these tools help folks build stronger relationships, find the right resources, enhance knowledge management and gain wider perspectives. Books like the Wisdom of Crowds tell us that if we can find a way of sourcing everyone’s input in a group, then the group makes better decisions.
Because you are here reading this blog, you are more likely to believe that social networking tools are useful. But would you bet your own money on it?
Let us know what you think…
Aaron McCormack is CEO of BT conferencing http://www.conferencing.bt.com/ a division of BT Group plc, one of the world’s leading providers of telecommunications services. For over 20 years, BT Conferencing has specialised in the delivery of robust, reliable and innovative conferencing solutions – backed up by high quality service and support.
How to really measure how profitable you are
in Get organisedWe are delighted to announce today our very first guest blog post from Jake Willott, a smart business owner who wanted to contribute to the Being Smarter community… Take it away Jake.
__________________________
Mark-up and Gross Margin are two different beasts
A clear understanding and application of the two within your pricing model will have a drastic impact on the bottom line.
Mark-up is the percentage difference between the actual cost and the selling price
Gross margin (or gross margin) is the percentage difference between the selling price and the profit. Profit/Sales Price.
These two definitions are extremely important because gross margin directly tells us how many of our £’s from sales are profit.
It is easy to make the mistake in thinking that if a product is marked up by 25%, the result will be a 25% gross margin on the income statement. However, a 25% mark-up rate produces a gross margin percentage of only 20%. By targeting the gross margin percentage vs the mark-up percentage, businesses in general can add an additional 5% profit to the bottom line.
A worked example:
If you increased the selling price of a product by 5% the figures then look like:
Buy at £90 sell at £120. £30 profit (or 25% gross margin)
Increase sale price by 5%. £120 x 1.05 = £126
The cost to us remains the same so the gross profit is now £36 and gross margin is 28.5%.
So the gross margin has gone up by 3.5%, which as a percentage of the starting 25% is an increase of 14%
So for a 5% increase on the selling price we’ve gained a 14% increase in gross margin.
Even better, let’s look at the cash profit. You were making £30 on the sale, now you’re making £36 – an extra £6. As a proportion of our initial £30, that’s a 20% increase.
A 20% increase in cash for a 5% increase in sale price.
The reason this happens (if you’re still here) is that any improvement in gross margin % is multiplied by the turnover.
In summary:
Figure out who your most profitable customers are, and we can only know that if we measure using the correct metrics.
And a small change in selling price has a large effect on increasing profit.
Jake Willott is the MD of Computer Medicine
The computer people who come to you
www.computermedicine.co.uk
Personnel Today features The 8.45 Club
in Being Smarter newsIt’s always a good feeling when the industry trade press feature one of your innovations. Lesley Everett’s Walking Tall personal branding course has been featured today in PersonnelToday.com.
One of our esteemed partners and a true expert in her field, Lesley Everett commented…
Lesley is one of a number of partners The 8.45 Club works with to develop courses for business audiences. If you are a true subject matter expert with a story to tell and an audience who wants to hear it – why not consider using this virtual presenter format as a way of reaching untapped audiences as well as generating an additional source of income… while you sleep.
Use the contact us link at the top of the page to request a call.
25 million meetings take place in the US per day. Make your one count.
in Get organisedIf in doubt, call a meeting – that’s right isn’t it? Over 25 million meetings take place in corporate America daily. I suspect there is a proportional number in the UK too. Almost certainly half of that time is wasted.
According to a 2007 Microsoft survey, the average time a worker spends in meetings each week around the world is 5.6 hours and 69% claim these meetings are unproductive. Were you interviewed? because I bet you are in the same boat.
How many hours do you spend a week attending meetings? Is there a better way – would a phone call suffice? Would a quick chat over coffee get the job done? It’s always worth considering.
There are always times however, when it is absolutely necessary to have a meeting whether it’s to get a decision made or to review a business case. Want to know how to run a successful meeting? Then there’s some tips below and watch out for a post on ice-breakers coming soon.
1) Know when and when not to call one
2) Get inspired before you start
3) Preparation is key
4) Focus on three areas beforehand:
5) Rules for chairing
7) Don’t let these things happen
(8) Action points – the whole point of a meeting
Student Gems review
in Get organisedWe first came across Studentgems.com courtesy of The Pitch – an excellent competition run by Sift Media in a Dragon’s Den style. Thanks to their comprehensive Twitter coverage we took a look at their site and what they had to offer – and it’s absolutely on the money as a broker between students, keen to learn and gain experience, and small and big business, keen to keep costs low and have a flexible labour force.
Win-win is always a good starting point for any business and they certainly achieve that alongside great PR coverage on The Guardian, BBC and Observer websites.
In a nutshell, if you are a business looking for specific local skills, you register on the site and advertise those skills. If you are a student with those skills, and have registered, the site will do the brokering – you search or people find you, negotiate a fee and the site takes a small subscription fee.
Joanna Ward is the founder of the site and can be followed here on Twitter.
Think flexible – think creative – do you really need another full time person, or would a relatively cheap flexible resource be a better approach? Studentgems may be the answer for you.
The debate on whether you give away information without registration continues
in Get noticed - marketing tips, Get tech savvyOne of my favourite authors, David Meerman Scott set this debate up in his book The New Rules of Marketing and PR a couple of years ago – and it continues.
The internet marketing ‘guru’s’ – you know, the guys who earn the big bucks with the giant mailing lists make a living out of capturing email addresses, however there is a growing school of thought that in ‘normal’ businesses – particularly in the B2B space that it’s a bad thing to insist on capturing addresses.
There’s a great post today from Michele Linn backing up David’s theory with three ‘aha’ moments – a thing we like here at Being Smarter.
Check out her post and see what you think.
10 great Ashes facts for the pub tonight
in Get organisedDid you know…
1) In the 4th Test in Sydney in the 1882/83 Ashes series, the captains agreed to play on separate pitches. This was the only occasion this has happened in the history in the Ashes. Australia won this match by 4 wickets.
2) Ian Johnson, Australian captain tried to get the umpires to suspend play because of the sawdust on the damp pitch which blew into his eyes while he batted (bless)? Jim Laker went on to pulverise the Australians by getting 19-90.
3) The 3rd test in 1970/71 was completely washed out by the British summer however the toss was completed and won by England and so the Test was deemed to have commenced…
4) Sir Don Bradman’s batting average in Ashes tests was 89.79… not bad huh? Sir Don scored 5028 runs with 12 fifties and 19 hundreds with a highest score of 334.
5) England have not won an Ashes Test at Lords since 1934.
6) The teams have played 64 Ashes series. Australia have won 31, England 28 and five have been drawn. Overall in 317 tests, Australia have won 131, England 97 and 89 have been drawn.
7) The words on the original Ashes cup reads as follows :
When Ivo goes back with the urn, the urn;
Studds, Steel, Read and Tylecote return, return;
The welkin will ring loud,
The great crowd will feel proud,
Seeing Barlow and Bates with the urn, the urn;
And the rest coming home with the urn.
Short of words in 1882 me thinks.
8 The highest innings score by Australia in an Ashes series is 729 for 6 declared at Lords in 1930, while their second best test innings total against England is 701 at the Oval.
9) For England, Sir Leonard Hutton’s 364 helped them reach 903 for 7 declared (the 2nd highest Innings score by any country) at the Oval, and the test victory by an innings and 578 runs – the biggest test win margin for any country against anyone.
10) Shane Warne, is the highest wicket taker in an Ashes series. Warne has 172 wickets from 31 Ashes matches at an average of 22.30.
Why not add one below?