How to Maximize Total Profit

How We Added 14% to Our Clients' Profit by ONLY Changing Efficiency Targets There's ONE lever most brands aren't pulling: SKU-specific efficiency targets based on merchandising strategy. Every product has different: - Landed costs - Inventory constraints - Demand levels Yet most D2C brands apply identical efficiency targets across all SKUs. Let's look at two t-shirts with the same $50 MSRP: SKU #1 | Black T-Shirt Landed cost: $9/unit Inventory: 5,000 units Demand: HIGH Profit calculation: $50 - $9 - $28.50 = $12.50/unit → Optimal CPA target: $28.50 SKU #2 | Red T-Shirt Landed cost: $10/unit Inventory: 7,500 units Demand: LOW Profit calculation: $50 - $10 - $32.50 = $7.50/unit → Optimal CPA target: $32.50 Results over a 3-month period... Scenario 1: SKU-Specific Targets Black T-shirt: 5,000 units × $12.50 profit = $62,500 Red T-shirt: 7,500 units × $7.50 profit = $56,250 TOTAL PROFIT: $118,750 Scenario 2: Blended $30 CPA Black T-shirt: 4,200 units × ($50 - $9 - $30) = 4,200 × $11 = $46,200 Red T-shirt: 5,800 units × ($50 - $10 - $30) = 5,800 × $10 = $58,000 TOTAL PROFIT: $104,200 Unsold inventory: 800 black + 1,700 red = 2,500 units Capital tied up: $24,200 That's a 14% profit increase ($14,550) plus better inventory performance! Key insight: Accept lower margins on slow-moving products to convert inventory to cash FASTER, then reinvest in winners. This simplified example excludes: - LTV and repeat purchase value - Cash position impact - Seasonal demand fluctuations - Product category halo effects Every product in your catalog deserves its own efficiency target. Period. Here's your action plan: 1. Map your entire product catalog by profit margin, landed cost, and inventory position, cash position and 90D LTV. 2. Set aggressive CPAs on best-sellers with high margins. 3. Allow higher CPAs on slow-moving inventory to convert it back to cash. 4. Structure your ad campaigns by SKU (not product type) to control these variables. 5. Measure SKU-level CPA instead of blended account metrics. Brands who implement this approach see 10-20% profit improvements within 60 days, plus dramatically improved inventory turnover. The old way: "Our target ROAS is 2.5x." The smart way: "Our high-margin bestsellers target 3.5x while our overstocked items target 1.8x." Which approach are you using?

This one metric separates thriving businesses from failures. Most entrepreneurs overlook it until it's too late. It’s not hard to create a great product or service. The real challenge is producing it for less than people are willing to pay. This is where businesses thrive or die. At Quest Nutrition, our mission was clear: make a protein bar with the flavor of a candy bar but the protein profile of a protein powder. It was crazy expensive at first. (We joked about having the most costly protein bars on planet Earth.) We knew to scale, we had to drive costs down. Here’s how we did it: Model It Out. Build a detailed business model. Know your costs at different volumes. Break down your costs for ingredients and employees, and align them with your revenue. Scale Smartly. Initial costs will be high. As you grow, buy ingredients in larger quantities to reduce costs. Validate Your Assumptions. If your product needs to be priced higher than what customers are willing to pay, you don’t have a business. Run thought experiments to test this before sinking years and money into it. Stay Objective. Don’t fall in love with your idea. Base your decisions on data. The worst time to realize you can’t be profitable is after launch. Now let’s apply this to hiring. Model It Out: Calculate the cost of hiring help at different levels of your business. Break down the costs of each hire, including salaries, benefits, and overheads. Align these costs with the revenue they are expected to generate. For each volume of business, determine how many employees you can afford and what their impact on revenue will be. Scale Smartly: Hire in phases. Initially, take on more roles yourself or hire part-time help. As your business grows and revenue increases, you can hire more full-time employees. Focus on efficiency before increasing headcount. Validate Your Assumptions: Ensure that hiring additional help will directly contribute to increased revenue or significantly reduce costs. If it doesn’t, rethink your strategy. Run the numbers and see if you can maintain your profit margins with the new hires. Stay Objective: Don’t hire based on gut feeling or desperation. Use data to make hiring decisions. Track the performance and ROI of each new hire. If they aren’t contributing to profitability, reassess their role or your hiring strategy. Key takeaways: → Model your costs meticulously and align them with expected revenue.  → Scale your hiring and production smartly, focusing on efficiency. → Always validate your assumptions with data and thought experiments. → Stay objective and use data to guide your hiring and business decisions.

🚀 Rethink Scaling: A New Playbook for $40M Success Scaling from $20M to $40M demands a departure from the conventional. You've built something extraordinary, reaching $20M in sales, but to double that, it's time to rewrite the rules. 🎯 What to Focus On: Increase Productivity Spend Less 📘 Your Simple Guide: 1. Clean the House 🏠 Evaluate every process, contract, or deal. Slash at least 15% of operational inefficiencies. How? Embrace automation. Let technology carry the load, freeing you to strategize and innovate. 2. Renegotiate Contracts 💼 Empower your buying team to secure better deals with suppliers. Seek significant drops in the costs of acquiring goods and services. Smart negotiations fuel sustainable growth. 3. Upsell and Cross-sell 📈 Uncover ways to maximize sales with existing customers. Aim for a 20% increase in customer value. Your loyal customer base is a goldmine; extract its full potential. 4. Find Growing Markets 🌍 Expand your business by 25%. How? Tap into new customer pools in unexplored territories. Direct your focus to burgeoning markets ripe for exploration. 5. Cash is King 💰 Master the art of cash management. The target? Get paid 10 days faster. Improved cash flow is the lifeline to sustainable growth. 6. Trim the Inventory 📦 A leaner inventory is a more profitable one. Boost turnover rates by 20%. Sell faster without drowning in surplus stock. 7. Employee Retention 🤝 Commit to a 15% reduction in employee turnover. It's not just a goal; it's a promise to your team that you're on this growth journey together. Quality people stick around, eliminating the need for constant recruitment. 👊 Ready for the challenge? Rewrite the rules, redefine success. #BusinessScaling #GrowthStrategies #RedefineSuccess

Profit, not revenue, is the key to success. Here's a 5-step Margin Analysis framework to track profit vs revenue As a financial consultant, I've worked with businesses struggling with profitability due to a lack of in-depth margin analysis. Managing your margins can be a game-changer for your bottom line. I work with clients on shifting their mindset that margin analysis isn’t just a one-time strategy; it’s a continuous process. To help clients stay on top of their game, I put together a checklist of daily, monthly, and quarterly habits to be sure you’re always optimizing your margins. Daily Habits: 1) Review Sales and Cost Data: Do a quick check if daily sales are in line with your projections and monitor unusual changes in costs. 2) Track Key Performance Indicators (KPIs): Focus on daily KPIs such as gross margin percentage and average order value to identify issues. Monthly Habits: 1) Analyze Margin Trends: Compare your current month’s margins against previous months to spot trends or anomalies. 2) Update Financial Projections: Adjust forecasts based on actual performance and any market changes. 3) Review Profitability by Product/Service: Identify which products or services are underperforming and consider adjustments to pricing or cost structures. Quarterly Habits: 1) Conduct a Comprehensive Margin Analysis: Deep dive into your financial statements to assess the health of your margins. Look at (COGS), operating expenses, and net profit margins. 2) Reevaluate Pricing Strategies: Based on your margin analysis, adjust your pricing strategy to ensure optimal profitability. 3) Optimize Cost Structures: Review your cost management practices and look for opportunities for cost reductions or process improvements. Hope this simplifies the process, and helps to start building these habits. Also, I've attached a brief guide on How To Strategically Improve Profit Margins If you need help developing and executing a financial strategy DM me ___________________ Please share your thoughts in the comments Follow me, Beverly Davis for more finance insights

Attention DTC: this is how you grow profits. It's my approach, honed over 23 years and $1B+ revenue. Distilled into 4 key strategies 1. First, the primary goal should be to grow PROFITS not revenue Number 1 reason DTCs fail is they run out of cash Cash is oxygen. Generate it and you can pocket it or invest in acquisition Put your blinders on and focus on profits 2. Best way to grow profits? Maximize customer lifetime value (CLV) CLV = sum total of profits generated by your customers, net of all costs CLV is the be all end all, not margin, contribution, CAC, conversion rates, etc. Max CLV = max profits 3. To maximize CLV, focus on your BEST customers There’s an 80/20 in everything 20% of customers drive 80% of profit--your whales Acquire, nurture, retain more of THEM. Orient the biz, product, and service around THEM They are the small hinge that swings the big door 4. How to ID your whales? R and F Recency (R) = when they last acted Frequency (F) = # times they acted R and F predict M (total spend) and ultimately CLV RFM is the essence of database marketing. It should inform everything you do. It's nerdy but it works. 

ROAS is a vanity metric disguised as a financial metric, designed for marketers who are scared to report real numbers. If you're serious about sustainable growth, answer these three questions: 1. What's your TRUE marginal CAC ceiling? This isn't your target CAC or platform CPA—it's the absolute maximum you can sustainably spend to acquire an incremental customer. Calculate your marginal CAC using real unit economics: → Start with Lifetime Value (LTV) (total revenue per customer) → Subtract all variable costs over the customer's lifetime: ↳ Product costs ↳ Shipping & fulfillment ↳ Processing fees ↳ Returns & exchanges The resulting number is your marginal CAC ceiling. Also, understand how this ceiling changes: → By product or category (due to varying margins, AOV, LTV) → Over time (seasonality, promotions, competition) Knowing your marginal CAC ceiling lets you: ✅ Aggressively scale winning channels ✅ Quickly eliminate inefficiencies ✅ Create margin-aware offers & creatives 2. What’s your Lifetime Gross Profit (LGP)? How to calculate Lifetime Gross Profit: → Identify the average number of purchases per customer (or average subscription lifespan) → Calculate gross profit per purchase (Selling Price – COGS) → Multiply the two: Gross Profit per Purchase × Average Customer Purchases Shift your focus to maximizing total gross profit generated per customer throughout their lifetime by: → Increasing customer retention rates → Boosting repeat purchase frequency → Improving your AOV 3. What’s your LGP to CAC Ratio? Your LGP:CAC ratio measures how efficiently you're turning acquisition spend (CAC) into lifetime gross profit (LGP)—giving you immediate clarity on profitability. Calculate it simply: → LGP ÷ Current CAC = LGP:CAC Ratio At your marginal CAC ceiling, this ratio hits exactly 1:1, meaning you're covering variable costs but leaving no room for fixed expenses or profit. To sustainably scale an e-commerce business, aim for an LGP:CAC ratio of at least 3:1 or higher. A higher ratio signals healthier profitability and safer conditions for growth. TL;DR: Stop relying solely on ROAS. True sustainable growth comes from: → Defining your true marginal CAC ceiling (the max you can spend per incremental customer). → Defining and maximizing Lifetime Gross Profit through improved retention, increased purchase frequency, and higher AOV. → Maintaining a strong LGP:CAC ratio to ensure every customer acquired is truly profitable. When these metrics guide your paid media decisions, marketing transforms from an expense into a high-yield investment. What key metric do you prioritize to scale paid media profitably? Let’s discuss below 👇 – ♻️ Like, comment, and repost to help out another marketer. Hit follow for more.

Despite pricing being the most powerful business lever for growing Operating Profits, many mid-market companies still rely on static, cost-plus formulas to generate prices, missing key opportunities to drive higher profits on both ends (leaving money on the table and missed sales opportunities). Price optimization is built on advanced analytics, including AI and machine learning, to set prices that maximize profitability while aligning with broader business objectives (i.e., balance revenues with gross profit $). It leverages transactional and market data to deeply understand customer behavior and adapt to changing inputs (i.e., competitor prices, inventory levels, seasonality, etc.). Whether you’re in manufacturing, distribution, or retail, some form of an insights-driven, dynamic, and automated pricing strategy is essential for profitable growth. In the below article (see comments), we explore foundational pricing methodologies such as dynamic pricing, value-based pricing, and competitor-based pricing: 1. Dynamic Pricing: Adjust prices in real-time (or near real-time) based on competitor actions, inventory levels, market trends, and financial goals. Amazon’s dynamic model exemplifies how real-time adjustments can balance a low-price reputation with margin optimization. 2. Value-Based Pricing: Set prices on perceived customer value rather than costs or competitors. This ensures your pricing reflects the unique differential value you provide. A simple approach is assigning a competitive price index premium based on detailed customer research. 3. Competitor-Based Pricing: Position products strategically by considering competitors’ real-time prices. Techniques like premium pricing, price matching, and loss leader pricing help assign the right comp-pricing strategy to each customer or product segment. Successful price optimization requires avoiding pitfalls. Overcomplicating pricing models can lead to inefficiencies and erode trust among commercial teams—we’ve seen this too often. Relying on opaque “black-box” AI systems can also cause a loss of control and transparency. The key is balancing sophistication with simplicity, ensuring strategies are effective and embraced by the sales team. Building or insourcing your price optimization capabilities offers significant advantages. It aligns your pricing with business goals, provides greater decision control, and strengthens long-term pricing acumen. You can create a robust, customized pricing engine tailored to your unique needs by fostering collaboration across teams and continuously refining your models. Mid-market companies have a unique opportunity to elevate price optimization from a tertiary (or non-existent) concern to a core business function. Achieving this requires a deliberate, thoughtful approach that leverages advanced analytics, your internal/external data assets, and a collaborative approach with your Finance/Pricing and Commercial teams. #revenue_growth_analytics

Pricing is one of the most powerful levers for profitability, yet many businesses get it wrong by focusing on cost instead of value. The most successful companies don’t just set prices—they strategically optimize them to maximize revenue and customer satisfaction. Here are three golden rules for profitable pricing: ✔︎ Know Your Value – Customers don’t pay for what something costs; they pay for the perceived value it brings them. A strong pricing strategy positions your product based on benefits, differentiation, and competitive advantage. ✔︎ Segment Your Pricing – Not all customers have the same willingness to pay. Tailoring your pricing to different segments—whether through tiered pricing, dynamic adjustments, or premium options—ensures you capture maximum revenue from every market. ✔︎ Optimize, Repeat – Pricing is not a one-time decision. Market conditions, consumer behavior, and competition evolve, and your pricing strategy should too. Regular testing and optimization ensure you stay ahead and maximize profitability. Smart pricing is the key to business growth. Are you pricing strategically or just guessing? Let’s discuss. #PricingStrategy #RevenueGrowth #ValueBasedPricing #BusinessSuccess #Profitability

Every business owner wants to save on taxes, but they may not realize that focusing only on deductions will not grow their business. The solution? Focus on profitability first. Because when your business is profitable Smart tax strategies become a byproduct of your success. Not your survival plan. Here’s how you can prioritize profitability and grow your business sustainably- 1. Focus on revenue before tax savings Increase your revenue streams—offer add-ons, upsell, or cross-sell services. When revenue grows, tax savings become part of the strategy. Not the entire strategy. -- 2. Stop undercharging and align your pricing with the results your services bring. A profitable pricing strategy means more cash flow. And less stress chasing deductions. -- 3. Reinvest for growth, not just saving. Invest back into your business to build momentum and lasting profitability. -- So before you chase your next deduction Ask yourself- Is my business truly profitable? Because when it is The savings take care of themselves. PS: What's one change you've made to prioritize profitability in your business?

Years ago, I heard a piece of advice that stuck with me: "Find what works and do it over and over again." At the time, it felt repetitive and uninspired. → But as I delved deeper into the e-commerce world, this advice started making perfect sense. At StoreHero I’ve seen: Business owners light up when they identify their high-margin orders Companies boosting profitability by focusing on what’s working A clear path to streamlined operations and happier customers → The magic lies in replicating these high-margin orders. Start here: 1 - Identify your top-performing products. This isn’t just about knowing what sells but understanding the factors behind their success. 2 - Analyze the data. Look into what makes these orders profitable. Is it the product combination? The pricing strategy? The target audience? Location? Bonus points for understanding and eliminating / minimizing the unprofitable ones 3 - Replicate the conditions. Create more offers that mimic these successful elements. Sometimes the simplest strategies are the most effective.