Financial Management is all about Money in the Bank

In any business, for-profit or not-for-profit, the ultimate goal is to have sufficient funds to support the organization's short and long-term goals. The challenge for all individuals is “how” do we do this, or “what” levers do we pull to improve financial performance?  

We have two options: 1) increase revenue or 2) reduce expenses. All decisions derive from these two parts of the equation to increase money in the bank. A couple of examples to illustrate my thinking and hopefully stimulate your creativity to improve bottom-line profits. 

Marriott International brands have 1,597,380 rooms around the world. If they can generate an additional $0.50 in revenue from each room sold and they average 70% occupancy, they make an additional $204 million per year. They have different ways to generate this revenue and not all of these funds will drop to the bottom line, but this illustrates my simple point—small incremental revenue can reap big rewards.  

Subway has approximately 37,000 stores. If they can reduce their paid labor costs by 10 minutes per store per week and pay on average $12 per hour (likely low) they would save $3,848,000. Note: this saving is not 10 minutes per day, it is 10 minutes per week, slightly more than a savings of 1 minute per day. The key to making this viable and palatable to a team is to focus on eliminating waste (More on this in a later blog—stay tuned).  

Every company must look to increase incremental revenue and reduce incremental expenses to maximize profit. What are you doing to increase your revenue? How are you identifying and eliminating waste to put more money in the bank?