Incremental Revenue is easily misunderstood. What if we told you that in 3 Years You'll have $823,600 in Your Bank Account!
Now, would an extra $120,000 in growth really help you? Especially if you have to pay someone like the AMP team to accomplish it. This thought is totally fair and legitimate.
Here is the challenge, many react to it emotionally and not mathematically. So let's dig into the math and find out.
Misconceptions First!
Many know that there overhead runs somewhere around 65% or maybe higher. Thus they assume, if you grow me only $120,000 and I have to pay overhead and your fees, there is nothing left for me.
This thinking looks something like this:
$120,000 in growth
less 65% overhead x65%
_______________
leaves in profit $42,000
less a consulting fee leaves nothing for me!!
Reality!! Reality!! Reality!!
Here is why this is flawed thinking. If you grow $120,000, will your rent, electricity, payroll and other fixed expenses change? No is the answer. Will your overhead increase in some areas, absolutely yes. It is called your variable overhead. This is composed of supplies, lab fees, and credit card fees. All in these total 15-20% of your incremental growth. So let's use the high end of this can calculate how $120K in growth could impact your practice.
$120,000 in growth
less 20% in variable expenses x20%
_______________
$96,000
less the consulting fee of $50K -$50,000
______________
Incremental profit in year 1 $46,000 more in your bank account
Here is where this gets fun, what if you simply maintain your new level of productivity and do nothing else??
Year 2 Incremental Profit $96,000
Year 3 Incremental Profit $96,000
______________
Total 3 Year Incremental Profits $238,000 more in your bank account
This is all based of of your doing only $120,000 in growth. What if you met our average of $364,000 in growth? How much would you have in the bank at the end of 3 years?
$364,000 in growth
less 20% in variable expenses x20%
________________
$291,200
less a consulting fee -$50,000
Incremental profit in year 1 $241,200
Incremental profit in year 2 $291,200
Incremental profit in year 3 $291,200
Total 3 Year Incremental Profit $823,600
When looking at the longer term outcome of getting help, this nearly a MILLON DOLLAR decision for you. What would you do if you could pay down your debt, invest in your retirement almost a million dollars in the next 3 years. How much would that help.
We hope you fully understand his math, if you don't, please contact us to discuss it. If we are wrong, please tell us how. We have seen this in reality many times.
