Is it possible to increase your EBIT to 20 percent? Yes! And you have to do it fast to protect your business from unexpected sales losses. Watch this video to find out the metrics we use that will help you do that.
Your EBIT reflects how profitable your company is.
The higher your EBIT, the healthier your business is, financially speaking.
You can also use your EBIT if you want to secure a loan or additional investment for your company.
It would be much easier to do that when the figures are high.
So how do you get your company EBIT to 20%?
You need to look at three important factors:
Operation expenses include your monthly rent, payroll, taxes, utilities, and supplies.
Cutting down on these areas can improve your EBIT.
If you are renting an office, try finding another space with a lower rent.
You can also trim down your employees.
If two tasks can be handled by one person, perhaps you can let go of the other.
Assess your books if you are wasting your money on unnecessary expenditures.
Cost of goods sold (COGS)
This also affects your profit and your EBIT.
Reducing your cost of goods sold will certainly improve it.
How do you do it?
Buy in bulk if you are purchasing materials and supplies for your business.
If you can find something cheaper than what you are using now, go for the cheaper one.
Automating some of your processes can also reduce your COGS.
This is an accounting process that converts the original price of your fixed assets into the expense. As time goes by, the value of your fixed assets decline.
There are four types of depreciation method, and the method you choose will affect your EBIT.
Decreasing the annual depreciation expense of your business can greatly improve your EBIT.
For example, the straight-line method allows you to deduct the same depreciation amount every year.
And that reduces your depreciation expense while increasing your EBIT.