Calculate The Power of 3
See what is possible with your business.
See what is possible with your business.
The calculation for Product Retail increased profitability is easy. Input your Gross Revenue (before fees) and enter your Cost of Goods Sold (COGS) — the Power of 3 calculation will show what’s possible for you.
The calculation for Product Retail increased profitability is easy. Select the ‘Professional Services’ tab on the calculator. Put in your gross revenue and enter your Salary and Wages, the Power of 3 calculation will show what’s possible for you.
Our dedicated bookkeepers and CPAs are committed to helping you grow your business by delivering timely, accurate financial reports and visibility into your financials. When you implement the Power of 3 in your business, our expert team will provide insight into your growth!
Tools developed just for you: see return on ad spend, P&L forecasting, and more.
To see what the Power of 3 calculation can do for you:
– Product Retail — insert your monthly gross revenue and monthly cost of goods
– Professional Services — insert your monthly gross revenue and monthly salary/wages
Complete the entire form to see how much more you could possibly save.
Major corporations utilize the Power of 3 as a standard operating practice to increase productivity and profitability over time. Although it is not widely known in the traditional small business environment (specifically, businesses with less than 30 employees), the Power of 3 could prove to be incredibly rewarding for small business owners!
In understanding the Power of 3, it is helpful to understand the difference between profit and cash flow. From there, you will be able to improve your profit and cash flow and have visibility into your business financials. Whether you sell products or time, utilizing the Power of 3 will exponentially increase your profitability!
Cash flow is defined as all of the money that flows into and out of your business over a specific period of time. Positive cash flow means there is more money coming in than going out, while negative cash flow means that there is more money going out than coming in.
Profit is not cash flow. However, being aware of when cash flows into and out of your business will enable you to make informed financial decisions at the right time, so that you do not run out of cash. The more visibility you have into your cash flow, the more profitable your business will become!
If you struggle with cash flow, you are not alone. It is a common struggle for small business owners! According to a U.S. Bank study:
Businesses thrive when business owners have financial visibility. As the best practice, financials should be reviewed monthly to ensure business goals are being met, plan for tax season, and make informed, data-driven decisions.
Here are some steps you can take to maintain a healthy cash flow and increase your profitability:
Some assume that selling more products will increase profits, but this is not necessarily true. The key is to ensure that your pricing delivers a profitable margin after factoring in all your costs for the product or service plus your overhead expenses (such as rent and insurance).
Research your industry metrics to see how you compare to your competition. This will show you where you place along the average, and how you can accelerate to the top.
The Profit & Loss Statement can help you to predict your profit and trends months in advance. They reveal financial cycles in your business, such as holidays and other high and low periods that affect your sales. Examining your Profit & Loss Statement on a monthly basis will provide key insight into the financial cycles your business experiences.
Select a few Key Performance Indicators (KPIs) to focus on. For example, you could aim for a 20% bottom line (meaning 20% net profit). To achieve this, you must calculate the amount of sales you need to make, as well as your expenses (COGS and general and administrative expenses). This will keep you mindful of your cash flow and laser-focused on the steps you need to take to increase your profitability.
The Power of 3 is a simple principle. It is the contrast of increasing one factor by a negligible 3%, while decreasing the opposite by 3%.
This is an example of increasing the price of your product by 3%, while reducing the cost of goods sold by 3%.
In this instance, you increased your price by 3%, and reduced your labor costs by 3% by increasing productivity through technology.
To illustrate the two examples above, let’s take a deeper look at the numbers in action. Let’s start with a retail store that sells products:
This is a clear testament to the effectiveness of the Power of 3! Now, let’s take a look at a business that sells time:
By making minor tweaks to their prices and costs of production, these businesses were able to generate greater revenue, increase efficiency, and reap an impressive profit increase!
When you know your numbers, you can grow your numbers. By performing monthly reviews of your financials, you connect the dots between your sales, expenses, and profits to ensure business growth. Understanding your key data points will help you measure the financial success of your business and make improvements as needed. Below are some examples of the key information that should be reviewed each month:
Accurate, consistent review and analysis enables you to make meaningful decisions as you grow your business. No matter what type of business you run, monthly financial reviews are crucial for long-term success!