Last night's episode of Dragons' Den featured my favourite moment of series ten so far - and it wasn't the Den-wide hysteria prompted by Duncan Bannatyne during horror author Andrew Hannon's mischievous opening pitch.
Sure, that was entertaining stuff, but I watch the show primarily because I am interested in the nitty gritty of how businesses make money, which usually involves some insight about how they plan to get the gap between revenue and profit as small as possible.
Gill Hayward, pitching a nifty backpack for children called YUUbag with her business partner Kellie Forbes, provided a classic example.
When asked by Deborah Meaden what was going to change about the company's business model to improve the revenue versus profit ratio they had projected, Hayward was able to respond with the same level of conviction and composure that the "mumpreneurs" had displayed during their initial presentation. She explained exactly how they had reduced production costs per unit by nearly £5 - and that the profit margin on each backpack for their next batch of orders had increased from £11.90 to £16.60.
This sealed the deal for YUUbag: the figures were mightily impressive, and it made Hayward and Forbes that much more credible. They demonstrated a willingness to engage with the fine details that hold the key to maximising their company's profit.
The Dragons know that keeping control of costs is often crucial to a company's chances of long-term success. This is why online retailer Matthew Conridge lost credibility when he explained how his business had taken increased warehouse space - and the huge overhead that goes with it - to accommodate what the Dragons perceived to be an excessive amount of stock.
In contrast, it would have been music to the Dragons' ears when Hayward explained that she and Forbes had spent a lot of time "working out what makes their business tick".
It strikes me that this is excellent advice for anyone running a business, and the practice should extend to your indirect costs. At Make It Cheaper we preach the value of reducing overheads - and offer a service that helps businesses do so - because this is an area where untapped potential for profit often lies.
The amount that a business may save after reviewing their existing overheads depends on many factors, but let's say it is £2,000 a year. As far as your accounts are concerned, reducing your costs is fantastic because the saving goes straight into profit without you having to sell a thing. Using the example of YUUbag, which makes a profit of £16.60 per sale, a £2,000 saving is the equivalent to shifting 120 extra units.
We talk to new and potential customers about getting into the saving habit and regularly reviewing every cost associated with their business. This isn't about cutting corners - it's about maximising the number of pence you make in profit for every pound of revenue generated. This kind of good practice helps you understand what makes your business tick and gives you the best possible chance of success. Perhaps it can lead to even bigger things. Just look at YUUbag, which now has a £60,000 investment from Peter Jones and Deborah Meaden - and the opportunity to take their business to another level.