What £1.1m business did to increase profit by £350,000 in just 12 months
Running a business with 60 employees and a turnover of £1.1 million sounds like it should be smooth sailing.
But for Mike (owner of a healthcare business) it was far from it. Despite the sizable revenue, Mike faced a terrifying reality: his business was losing £10,000 every month.
No matter how hard he worked or how many hours he put in, the numbers just didn’t add up.
The more he looked, the more worried he became.
Mike knew something had to change, so he reached out for help.
The Problem: Hidden Costs and Wrong Assumptions
We began by taking a deep dive into the financials.
The Profit & Loss report initially painted a picture of a profitable and high-margin business.
With a 95% gross profit margin, everything seemed to be in order. But Mike’s business was still bleeding money of £10,000 a month.
What we uncovered was a critical mistake: the payroll cost of his operational team had been recorded as overheads.
This was a huge error. In a service-based business like Mike’s, the cost of delivering the service—whether it’s healthcare staff, surveyors, or technicians—should be treated as the cost of sales.
Instead, it had been lumped into overheads, skewing the numbers and giving Mike a false sense of financial security.
The result?
A much lower gross profit margin than Mike realized.
The 95% margin evaporated into a mere 28% once we corrected the accounts.
The Solution: Rewriting the Financial Story
We immediately implemented a simple, actionable 3 step plan to turn things around:
- Correcting the Financial Statements: We reallocated payroll costs, by moving the operational team expenses to the correct “cost of sales” category where they belonged.
- Reassessing Pricing: With the margin now more accurately reflected, Mike realized the business wasn’t operating at the high-margin level he thought. Prices had to be adjusted.
- Cutting Costs: We looked for inefficiencies across the business. The admin team cost was trimmed; underperforming staff were let go. Operational inefficiencies were targeted with small but impactful changes.
The Transformation: Profit, Cash, and Peace of Mind
The results were nothing short of remarkable.
A 10% price increase across the board was implemented—and not a single customer left.
Cost reductions in both admin and operational teams led to immediate savings.
Within just two months, the business was generating an extra £20,000 in profit every month.
That’s an extra £20,000 in the bank each month, and a big weight off Mike’s shoulders.
Mike’s business was no longer bleeding money.
With improved financial clarity, the business was now profitable, efficient and positioned for long-term success.
Mike could finally breathe, knowing his numbers were under control.
What You Can Do Now
If you’re a business owner struggling with profitability, take a moment to review your financials—especially how your costs are categorized. The most common mistakes we see are:
- Payroll costs for operational staff are mistakenly recorded as overheads.
- Direct marketing costs are not properly attributed to sales.
- Delivery costs (like van expenses) are wrongly treated as overheads.
By correcting these errors, you can gain a clearer picture of your true profit margin, make better decisions and steer your business towards sustained success.
If Mike’s story resonates with you and you’re ready to take control of your numbers, now is the time to act.
Don’t wait until it’s too late.
Get in touch today, to start rewriting your financial story.
To get in touch send an email to [email protected] or call us on 0161 410 0020.
Disclaimer
You must take professional advice before making any decisions based on the information that you have learnt here. While every effort has been made, to make sure it is accurate it cannot be precisely tailored to your personal circumstances. This article is for general information only and no action should be taken, or refrained from, as a result of this information. Professional advice should be taken based on specific circumstances in each individual case. Whilst we endeavor to ensure that the information contained in the article is correct, no liability will be accepted by Krystal Clear Accounting which is a trading name of Kim Marlor Associates Ltd or damages of any kind arising from the contents of this communication, or for any action, inaction or decision taken as a result of using any such information.
