More profit calculator

How the more-profit calculator works

Model how small changes to sales volume, prices, costs and overheads flow through to your bottom line. It shows that a modest price increase or cost saving can have an outsized effect on profit — the classic “profit levers”.

This is exactly the kind of scenario planning we do with clients as a fractional finance director or through management accounts.

The order the levers work in

Price, volume, cost and overhead do not have equal effect. For most businesses a small price increase is worth several times the same percentage improvement in volume, because the extra revenue carries no additional direct cost. Reducing direct cost comes next. Cutting overhead is usually the slowest and most damaging place to start, though it is where people begin.

Profit is not cash

A profitable business can still run out of money, and this is the single most common reason otherwise sound small businesses fail. Growth consumes cash: stock has to be bought before it is sold, customers pay after you have paid your suppliers and staff, and VAT and tax are collected long before they are due. The faster you grow, the bigger the gap.

Which is why the figure worth watching alongside profit is the cash conversion cycle — how long it takes for money spent to come back as money received.