Hi there. We always talk about the special sauce that our firm uses to help studios across the country be more focused on their key performance indicators and on looking at how they’re doing compared to their competition and their other studios across the country. I want to take a moment to dive just a little deeper into one segment of the importance of looking at your key performance indicators and some really cool things that you can do to help move your studio to that next level. As always, I’ll tell you that everything we do here, if you have questions about it, please feel free to let me know. I’m happy to help you, but in your spare time if you want to poke around and learn some new things, I want to give you a little head start. Okay, I’ve got a studio pulled up here and the normal default where you pop in will be on the key performance indicators page.
So there’s a lot of great information here where you can look to see how you’re doing. So all of these are clickable and live links and we’ll give you direct feedback on each of the indicators including how that indicators even calculated and knowing where your target should be versus where you were at. So I want to take you though to one section called Goal Seek, Goal Seek can be obtained here on the left-hand menu. And what this is going to do is help you look at where you are today versus where you want to go and what will help you get there. So I want to change our indicators here for a moment to the year in the upper right-hand corner and I want to look back at all of 2019 for this particular studio, their profitability rate was 8.8% now it depending on whether you’re a sole proprietor or an S Corp, we are looking to get to a certain place.
But let’s just say for a moment that we would like to be at 10% profitability and we’re going to change this indicator for the goal to 10% all right? Now you can also change the profitability ratio to be something else. So if you really want to look at operating profit in a dollar amount, and let’s say for example, this studio made 21,000, let’s say you want to get to 25,000 you can look at that. Just plug in the numbers. So there’s a lot of flexibility in what you can look at here. Okay, let’s stick with this. Let’s say that we want to get to $25,000 in profit. Now let me explain what the bottom part of the screen is doing. There are several ways to increase your profit. You can change your price, you can sell more, you can reduce your costs of your product that you sell, or you can reduce your fixed costs.
Things like rent, utilities things that are not variable based on the number of customers who walk through your door. Now, each of these has a number next to it and this is the calculation to say if, you would like to increase your operating profit to the $25,000 and you only want to adjust one thing, what will it be? Well, for price, you would have to have an increase of 1.53% or if you said no, I want to keep my prices consistent, but I need to change the volume, you would need 1.94% but let’s talk about what happens if you do a combination of things. How do you project what that means to be? So let’s give you a little plug in here for a moment and I want to change this a little more optimistic. I’m going to go up to 30,000 for a moment, okay, I said some dreaming in here. All right, so in this case, let’s say that you want to do a combination of things. You want to increase your pricing by 2% which is a very small amount. You can do one of two things. You can drag the indicator to be where you want it to be, okay? Now that’s sometimes a little tricky to get to the exact point you want like that. Or you could just type in the field right here and say 2% all right, that tells me that if I just did a 2% price increase, I would increase my profit to 26,125 so let’s say we do a combination of things. Let’s say that our volume, we’re also going to have an increase in volume of 1%, so 1% more brings us up to $28,090 okay? And we’re going to cut our fixed expenses by 1%. Let’s say two, let’s go all out, okay? If we do that, that’s going to take us, excuse me, it should be negative 2. I’m not going to increase our fixed routes. I want to decrease them, all right? So if we go up to negative 1.12% we will have achieved our goal. So you can say that this will give you some great, what if scenarios, especially when we talk about pricing, I use this a lot to demonstrate to folks what bottom-line impact they can have by a simple thing.
Donna Bordeaux, CPA with PYOPAccounting.com.
Creativity and CPAs don’t generally go together. Most people think of CPAs as nerdy accountants who can’t talk with people. Well, it’s time to break that stereotype. Lively, friendly and knowledgeable can be a part of your relationship with your CPA as demonstrated by Donna Bordeaux and PYOP Accounting.com. Donna and her husband, Chad, who is also a CPA, have over 50 years of combined experience as entrepreneurial CPAs. They’ve owned businesses and helped business owners exceed their wildest dreams. They have been able to help PYOP studios earn 4 times more profit than the average PYOP and are passionate about helping industries that help families build great memories.
