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Business Finance Tip: The Power of 1%

With most companies operating with very lean budgets there is little room to increase profits by slashing expenses. In fact, slashing labor costs (generally your top expense) by 1% may be impossible due to higher health care costs and minimum wage increases.  Now may be the time to think of raising prices by 1%.

 A 1% rise in revenue without increasing expenses may increase profits by more than 1%. For a company with a 33% profit margin, a 1% rise in revenue can increase profits by 3%.

In contrast, decreasing labor or overhead by 1% will only increase profits by roughly 1%.

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Richard Pon CPA, CFP