OUTDOOR POWER EQUIPMENT w w w. o u t d o o r p o w e re q u i p m e n t . c o m
26
W
e will begin by revisiting the fourth article
in this series from March 2014 Outdoor Power
Equipment. Remember my German friend
who said, "We all live by sales." And we all
agree that's true. It is now time for the rest of
the story. From the proceeds of the sales, our first responsibility is
to pay for the cost of goods sold. After paying cost of goods, the
money that remains is identified as Gross Profit (Profit Pillar
Number Three). It is from gross profit dollars that Operating
Expenses (Profit Pillar Number Four) are paid.
Let's not forget this is an actual OPE dealer/retailer case study
history. To refresh your memory as to how we arrived at our
subject for the fifth article, "Operating Expenses (Profit Pillar
Number Four)," using words and numbers, we will rebuild the
"Five Keystone Pillars of Profit, Ageless Formula for Success."
Remember, we are using rounded numbers to make it easier
to track our five keystone accounting principles. There is nothing
complex about "Five Keystone Pillars of Profit, Ageless Formula
for Success." It's how we approach managing business for earning
exceptional profits and sustaining growth for the next two or three
decades since everything we do today, and in the future, will be
dependent upon gross profit dollars earned.
From our actual case study, Net Sales (Profit Pillar Number
One) is $3,400,000. By subtracting $2,400,000, we determine
Cost of Goods (sold) (Profit Pillar Number Two). Cost of
goods (sold) is 70.59 of net sales dollars.
Five keystone pillars of profit (Part V):
FEATURE STORY
By Jim Yount
Profit pillar number four: operating expenses
Managing expenses and maximizing profits
Fifth article in a series
Image
©istockphoto.com/ozgurdonmaz
Remember my German friend who
said, "We all live by sales." And
we all agree that's true. It is now
time for the rest of the story.
