You’re in for a treat because we’ve saved the best for last! Okay, so maybe math isn’t the most fun part of running a business, but it’s certainly one of the most important elements! (And if the math includes big numbers in the profit column, it can definitely feel like one of the best parts of running your own business.)
So what can Marcus teach us about business math? Well, as a guy reportedly worth about $150 million, the answer is simple – a lot! In every episode Marcus breaks down the numbers for viewers so that they can understand why he’s making certain decisions. For instance, if he decides that a lunch/dinner restaurant should start offering breakfast, he’ll give you the breakdown to the dollar of why this decision makes sense financially.
Here are the three main areas Marcus looks at when he makes strategic business decisions:
One of the biggest mistakes that small businesses make is that they don’t try to fight for a deal on their raw materials. Time and again Marcus will go into a struggling business and discover that their COGs are out of control. He’ll coach them on how they can negotiate with suppliers or find better deals on the same materials. For instance, in one episode he helps an ice cream company that’s paying too much for milk. He takes them to the creamery and helps them learn about how milk is priced and then negotiates a deal to get them a substantial discount if they commit to buying a certain volume every month. This alone is enough to help them move the needle toward profitability!
Many business owners that Marcus visits assume that their profit margins are sustainable, but when he digs deeper he discovers that they were incorrectly calculating them or failing to compare them to true industry standards. He helps these owners understand where their profit margins should be, and comes up with a plan to make little changes to get them there. Sometimes all that’s needed is just to tweak prices very slightly or eliminate some products to steer consumers into purchasing different offerings. Marcus illustrates this when he helps a Greek gyro company roll out different meal combination options and offer new sides to increase average check sizes.
Other times, business are trying to do everything in-house when they could be saving money while achieving the same quality (or better) by outsourcing certain functions. This is the case when Marcus visits a candle company that’s developing their own candle scents and pouring them in-house at their small-scale facility. Marcus introduces them to a large-scale US-based candle manufacturer that can take any candle recipe and mass pour them to even the most exacting standards. This manufacturer can not only do a better job faster, but they can also offer a wider variety of glass containers at lower prices than the company was originally paying. The decision to outsource the actual candle manufacturing makes a huge difference when it comes to improving their profit margins.
Pricing is one of the most complex things that businesses deal with from a strategy perspective. There are so many different pricing approaches that small businesses can get lost along the way as they try to strike the fine balance between setting prices high enough to be profitable and low enough that they don’t price out their target audience. One of Marcus’s main talents is having a knack for assessing the complex business factors at play to determine exactly where a company’s product lines should be positioned in the market. In one episode of The Profit, Marcus visits a gazebo manufacturer that is hand-making their gazebos from the finest materials and luxury finishes. He looks at the steep price tags, and realizes that they need to offer a lower priced version of the gazebos as well. Initially, the owners are hesitant to make this change because they understand the cost of the materials that go into each gazebo and how many man-hours are required to build them, but they follow his advice and work on developing a stripped down version of the same product to offer at a fraction of the price. Marcus then takes this base model and gets a national home improvement chain to pick it up. They agree to feature one in each of their retail stores as a catalog order product. This is a win-win for the gazebo company because it allows them to sell more gazebos and also get more interest in their higher priced models once shoppers become familiar with their name!
Just like Marcus, you need to look at your business with an objective lens and figure out where you can make the math work in your favor. Analyze your COGs, profit margins, and pricing strategy to come up with creative ways to make the numbers work for your business!
Want to find more tips on how to improve your business? Check out and share the previous posts in this series for some helpful information and actionable advice:
The Keys to Success: Product, People and Process
The Hidden Cost of Everything
Leveraging Your Existing Business Assets
Knowing When to Say No to an Opportunity
Kate Pierce is the owner of LionShark Digital Marketing LLC, a West Michigan internet marketing company. Her areas of expertise include Paid Search, Search Engine Optimization, Social Media, Web Consulting for small businesses, Copywriting and Local Online Marketing. She lives in the Grand Rapids area with her husband and enjoys cooking, watching sports and spending time outdoors. Like a true digital marketing expert (i.e. geek), she loves talking about marketing theory and SEM trends… so don’t say you weren’t warned!