What Is Expense Reduction Analysts Linkedin Powerpoint
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4. Lowering Non-core Costs can have a faster and more direct impact in your bottom line A 20% cost reduction or a 40% sales increase would have a similar effect in the profits line. Which one is more feasible? Column1 20% Cost Reduction $ 1,000 $ 350 $ 350 $ 160 $ 140 Today $ 1,000 $ 350 $ 350 $ 200 $ 100 40% Sales Increase $ 490 $ 490 $ 280 $ 140 $ 1,400 Revenue Direct operating costs Labor costs Non-core (indirect) costs Net profit
8. Example of Savings Packaging Client — Cosmetics and consumer products manufacturer Spend — $450,000 Annual Savings — 33% Hidden Savings — $150,000 a year Client — Universal Printing and Manufacturing Company Spend — $325,000 Annual Savings — 21% Hidden Savings — $68,200 a year ____________________________ “ I’m glad we asked for ERA’s assistance. We’re pleased with the savings found.” ~ Mike Dehlic Vice President-Operations Universal Printing
9. 13% Example of Savings Merchant Card Processing Client — NutriSystem Spend — $370,000 Annual Savings — 59% Hidden Savings — $220,000 a year ____________________________ Client — Goodwill of the Heartland Spend — $84,000 Annual Savings — 25% Hidden Savings — $21,000 a year “ It didn’t take me long to appreciate ERA’s professionalism and innovation.” ~ Tammie Erb, CFO Goodwill of the Heartland
10. Client — Wholesale distributor Spend — $2.1 million a year Annual Savings — 23% Hidden Savings — $400,000 a year ____________________________ 13% 17.8% Example of Savings Freight (LTL, FTL, International) Client — Manufacturer Spend — $256,000 a year Annual Savings — 34% Hidden Savings — $73,000 a year Industry expertise and propri- etary benchmark data led to better pricing with tiered rates
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Editor's Notes
This table highlights the profit-making possibilities of reducing your non-core indirect cost by 20%. While every dollar saved is equivalent to a new dollar of profit, additional dollars of income are not. Applicable expenses must be deducted from the sales dollar to determine the remaining profit. To have the same effect on your firm’s business value, you would have to increase your sales by 40% The January 19, 2009 issue of fortune Magazine has an article entitled “How to Manage Your Business in a Recession” which sites McKinsey Research saying that they have found that in a typical S&P 1500 company, a price cut of 5% would have to generate increased sales volume of 19% in order to pay for itself – and that almost never happens.