That's where I was not confident, because I didn't know my numbers. I didn't know how to read financial statements, I didn't know how all this worked and therefore I did a lot of work, put in a lot of time, wasted a lot of energy, not making the money I could have early on. This is BYFIQ. Wealth and success come from understanding how finance works in business, and together we'll explore the most important topics to 10X your financial results. My hope is that we can work together soon. Please share and enjoy. There are four levers to profitability. That's it, just four. So if your business isn't earning the profit you believe it deserves, there are four things that we're going to talk about, and I'm going to tell you what is the immediate impact if you increase any of these by 1% on the bottom line. So are you ready? Because here's the deal. So many people are distracted in business. They're focusing on all these different items that aren't necessarily moving the needle. So today I'm just gonna give it straight to you talk about the four levers of profit so you can apply these things in your company to drive higher profits. And if you're not running a company, if you aspire to run a company, if you aspire to run a company one day, to be an entrepreneur or to be a business leader, understanding these four things will be super critical. I was doing an interview once to hire a controller for a company. I had interview after interview set up with these individuals and I would ask them the question what are the four things you could do to drive profits? And guess what I would say. Over half of them couldn't give me a straight answer. They're all over the place, they're talking about random things and I was like, okay, obviously you don't know because you can't answer this question directly. And today I'm going to give you what you need to know to answer the question directly. Before we get into this, I hope you're enjoying the financial pro program. I just want to give a shout out to a few people who are kicking some serious butt. They just started the program recently and they're already on level two. Remember, there are six levels to become a financial pro. So let me give a few shout outs to some individuals that are making great progress. Number one I have Eric. Eric with a K no last name Doing a great job. Keep up the good work, eric. I have Robert G. Robert is doing an excellent job. He's making his way right through the program. Good job there. Also, andrew S. Good job to you. Direct Farm, doing a wonderful job, making great progress. Keep up the excellent work. Juan S Okay, I'll keep your last names private in case you don't want your name out there. Doing a wonderful job as well. Next, joey in, keep up the fantastic work. You're making your way through level two and I'll give more shout outs in future episodes.

I just want to encourage all of you to become financial pros. So if you aren't enrolled in the free program, it's totally free. No gimmicks, it's my best stuff. I'm not here to upsell you on a future program 100% free. Over 100 video lessons and quizzes everything you need to become a financial pro and to fast track your way without going through all these boring classes. I'm just going to give it straight to you in this program, so be sure to check that out.

All right, let's go ahead and hop into these four levers of profitability, because these are super critical. Okay, there's four levers, very easy to remember. This is something you should remember because if I ever come face to face with you, I'm going to say, hey, what are the four levers? And you should be able to spit them out. Okay, here we go. Number one, that's lever number one. Lever number two is decrease your fixed costs. Lever number three decrease your variable costs. And lever number four increase your pricing. Now, out of those four volume, decrease your fixed costs, decrease your variable costs or increase your pricing, which one do you think has the biggest impact on the bottom line? Now, if you just said pricing, you get a gold star. Make yourself a gold star hanging up on your fridge because I'm so proud of you. Yes, that's correct, increasing price is value driver number one, that's your number one lever. And number two is decreasing variable cost.

All right, let me quantify the impact of a 1% change in any of these areas. So I'm going to explain. If you increase volume by 1%, you decrease fixed cost by 1%, you decrease variable cost by 1% or you increase your pricing by 1%. I'm going to explain. What is the impact? Right, the percentage impact on profitability. Okay, first, here we go. Pricing from best to worst profitability. Okay, first, here we go. Pricing from best to worst.

Increasing pricing by 1% will have a 12.5% impact on the bottom line for just the average company. Now, these percentages change for every company across different industries. So the numbers I'm sharing with you are just a general rule of thumb. Okay, this is just for your generic standard company. Right, generic advice, because I have to apply it across multiple industries.

But I want to give you some numbers so you can understand the variability between each of these levers. Right, the scale, in other words, right. So, increasing price by 1% on average, we'll have a 12.5% impact on the bottom line for a general generic company. Right, decreasing variable costs a 7.7% impact on the bottom line for a general generic company. Right, decreasing variable costs a 7.7% impact on the bottom line for every 1%. Increasing your volume so growing, growing your top line, doing more sales will have a 4.8% impact on the bottom line and decreasing fixed costs by 1% will have a 3.8% impact on the bottom line.

All right, there you have it in order. Pricing, number one. Decreasing variable costs your cost of goods sold. Lever number two volume is lever number three. And decreasing fixed costs is lever number four. Now, that can vary by industry, but the majority of the time, I'd say for 98% of the companies that I work with, pricing is the number one lever, and improving cost of goods sold is lever number two. Right, it may change by percentage. But there you have it. Check this out.

You may wonder why don't more companies just increase their price? Because, remember, when price exceeds value, customers don't buy. When perceived value exceeds price, customers buy. The reason why they don't go raise their prices number one they may not even understand what pricing should be, so they just look at their competitors and that's what they price their services at. Number two it takes work, because in order to increase your perceived value, you have to enhance the customer experience, you have to be more innovative, you have to improve the quality of your products, you have to invest in your brand, and all of those things take a lot of work, and sometimes it's easier just to discount your products. Right, bad strategy, bad strategy. I'm going to get into that. But hey, that's what some people do. So that's why a lot of companies don't focus in on their pricing and also, I'd say they don't have strong offers. When it comes to selling a product or service, you should have an offer that is so irresistible that when prospective customers come across it, they're like yes, I would be an idiot not to buy this product or service because it's going to solve my pain point. It's the only product out there that can solve my pain point in a unique and personalized manner and therefore they're willing to buy your offer. Okay. So if you don't have a strong offer compelling offer that's going to be one of your number one problems. And then the pricing thing sometimes it comes from confidence too.

I remember when I was young, when I was 16 years old and I was just starting my landscape company, I would go out to jobs and I would measure the site right. So I'd get the square footage. I would plug in the number of square feet of rock and sod and mulch and number of trees, the number of plants, how big the irrigation system was going to be. I measured everything and then I put it into this little calculator that I built. And then I would look at the price and I'm like, huh, something's off, it's too high. So then I would discount it because I was approaching pricing from my relative financial position and at the age of 16, I didn't have a lot of money. I was raised by a single mom. I left home when I was 16. I didn't have a lot of money saved up and therefore when I was starting out, I saw the world in terms of my financial position. So when I measured out somebody's yard and gave them a quote for landscaping and it ended up being 10 grand, I was like, wow, that's a lot of money 10 grand Because I didn't have 10 grand. So therefore I discounted down to eight.

I'd go do the work and guess what? It would still cost me the same amount of money I calculated and I would just lose money or leave a ton of money on the table. That's where I was not confident, because I didn't know my numbers. I didn't know how to read financial statements, I didn't know how all of this worked and therefore I did a lot of work, put in a lot of time, wasted a lot of energy, not making the money I could have early on.

Then I started to figure out how to strengthen my offer, how to build my portfolio and, through my reputation in the industry since our company was winning awards I was able to raise my pricing. But even still, looking back, if I knew what I knew today, oh my gosh, it would make such a difference and I would have captured so much more profit. So that's what I want to leave you with today are the levers of profit. So you know exactly how to impact profitability. Now, what comes with it?

What makes you even stronger and more powerful in the world of finance, is by applying strategy to these four levers. Because if you just say, yeah, you know we need to raise our price, and then somebody says, well, okay, how are you going to do that? And you're like, I don't know, let's just go raise our pricing. If you don't understand things like customer acquisition costs, your lifetime gross profit of a customer, how to create an offer, how to build a funnel, how to create a website that converts, and all the components and actions and strategies that allow you to raise your pricing, then you're just throwing out a bunch of random stuff and it's not going to be super powerful and impactful.

So, if you want to be influential as a leader in business, if you want to run a more profitable company, be sure to check out, like I said, the financial pro program. It's like free, like literally. I have nothing to gain from it other than seeing more people become financially literate in this world, and that's my mission. 10 million people, folks. That's what I want to do. I want to empower 10 million business professionals with greater financial literacy, and it starts with you. All right, I hope you enjoyed this episode. Be sure to share with the world because, hey, if we can educate more people in the world of business, the world will be a much better place. I hope you have a great week and until next time, take care of yourself. Cheers.