Page 82 - Paulisms: Gold Nuggets for Small Business

margin. It makes a huge difference to the overall profitability of the company.
Where I could, I would always try and work our margins upwards. If your business is doing $20m and you manage to win a small price increase to your customer or price decrease from your supplier (by simply asking) and you have an exchange rate win, volume discount, or prompt payment discount of 1%, its small but huge. That’s $200,000 gross profit margin, but also of pure, beautiful net profit, as overheads have already been assigned.
Work on this daily.
Paulism: To be a good business person you need to know the difference between mark-ups, margins and gross profits. If you don’t, it will cost you a lot of money. Never forget, business is all about MARGIN! Work on it!
3.3.3 Specialisation versus diversification
There are various opinions on what is the better way to enable growth and higher profitability: specialisation or diversification.
Some may think that to survive or grow they need to diversify. Diversifying could actually be a distraction, or even mean that they don’t survive. It is so easy to want to grow by diversification without appreciating whether the systems, people and model are actually right or whether there will be a lot of long-term profitable business out of diversification. Additionally, we need to ask whether it is going to take the focus away from what people are presently doing. It could be a double whammy in that the