Digests

Unit economics

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How three 1% improvements can boost net profit by 19%

Bill Gallagher December 30, 2016

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Unit economics 10

Processes & SOPs 7

• Three 1% changes to revenue and costs compound to 19% more profit.
• Delegating P&L improvement to the CFO is the biggest barrier to action.
• A $10M company found $400K in bottom-line gains within six months.

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Unit economics

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Labor Efficiency Ratio: a simple metric to tune business profitability

Bill Gallagher December 30, 2016

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Unit economics 10

Processes & SOPs 6

Management 5

• Most owners misstate their own profit by excluding their own wages.
• Management LER normalises to 3–4 across almost every business model.
• Set management wages first, then work backwards to the revenue target.

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