The profit curve of a firm is the total revenue (TR) curve less the total cost (TC) curve. these curves display the fluctuations of cost or revenue (Vertical Axis) at a given levels of output (increasing along Horizontal Axis).
Along the section of the curve where Total Cost is below Total Revenue, the point at which the 1st derivative of the Total Cost (TC) Curve is parallel (B) with the Total Revenue curve represents the level of output where Profit is maximized (A).
So now that you know this, what are the variables that you, the Business Owner, can address that impact “The Profit Curve”?
There are Six areas of your Business that you can address by defining Strategies, implementing Actions to increase Profits. Over the next few weeks, we will look in details to all six.
As your ultimate goal in your Business is to increase profits let’s look at the Six areas of your Business to address for profits are:
- Personal Profitability
- People Profitability
- Customer Profitability
- Sales / Marketing Profitability
- Product / Service Profitability
- Market Profitability
To begin with the Business Owner must fully understand their own Personal rate of return, From the Owner’s perspective on personal perspective, the major expense is….. YOUR TIME!
What is your time worth? What is your hourly rate? You can figure this out by dividing your annual income by 2,000 hours. When you have this number, it is time make decisions on WHAT you DO by using this simple rule:
Perform only those tasks for which you would pay someone else your hourly rate or more: otherwise, eliminate or delegate them.
Failing to do this means you are incurring tremendous “loss of opportunity costs” and not investing your time in profitable activities.
As you continue to grow your business by driving sales, remember that the critical measure of success in any business is profits. Develop the habit of regularly examining the profitability of your Personal time.
For more information on HOW you can contact one of our Business Coaches at: 1.610.768.7774.