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How to increase your Bottom Line

So you want to increase your bottom line? Quickly?  Read on!

The Bottom line

The bottom line refers to the net profit after taxation. As the name indicates, the bottom line appears towards the end of the Income Statement. 

Let’s look at it further

Revenue (1)

Less Operating Expenses (2)

= Net Profit

Less Taxation

= Net Profit after Taxation

(1)  Revenue

Depending on your business, this will include for example, sales, fees, commission and other types of income

(2) Operating Expenses 

Depending on your business, this will include for example, electricity, rent, marketing, salaries, telephone and other operating expenses

There are two ways to increase the Bottom Line

1.   Increase Revenue

2.   Decrease Expenses

If you achieve one, without the other, for example, increasing revenue by 10% while your expenses remains the same or decreasing expenses by 10%, while your revenue stays the same, your bottom line will increase – you have to do crunch the numbers to determine the R / % .

Example 1

Revenue increase from R100 to R110, Expenses remains unchanged at R60. Net Profit up by R10. Net Profit % increases from 40% to 45.5%

Example 2

Expenses decrease from R60 to R50, Revenue remains unchanged at R100.  Net Profit up by R10. Net Profit % increases from 40% to 50%.

Substantially increase the Bottom Line

But successful entrepreneurs take it further: they strive to increase revenue say by 10% AND decrease expenses, say by 10% – do it a few times, and your bottom line will substantially increase.

Example 3

Revenue increases from R100 to R110. Expenses decrease from R60 to R50.  Net Profit up by R20. Net Profit % increases from 40% to 55%.

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