Mission

Fat Margins was founded in 1996 by Charles Moyer to help business owners build profitable, sustainable businesses they could sell for top dollar at the time of their choice.

Goals

Business owners who implement the systems and procedures taught by Fat Margins are:

• Often able to add 20 -200% or more to their net income.
• Able to sell their businesses for at least twice as much than those who don’t make their businesses “sell-ready.”

What makes Fat Margins’ program unique? Two big concepts:

1. The focus on increasing profit margins, and thereby increasing the profitability of sales.
2. The emphasis on teaching business owners how to maximize the market value and salability of their businesses.

• Implementing Fat Margins’ programs will result in immediate profit and cash flow increases, but the biggest payoff comes later, when the business is sold and the owner receives payment for the goodwill value that has built-up over the life of the business.
• Goodwill often represents over half of the selling price for a business that demonstrates profitability and has been properly groomed for sale.

The foundation/research behind our program:

Two most common strategies businesses use to increase their profits are:

1. Cutting costs

• Working to cut costs generally yields a low rate of return for the hefty amount of time expended. Few savings are left to be found.
• Often, the cuts actually reduce quality and service levels to the point that they backfire, costing the company their most loyal and highest profit customers.

2.  Increasing sales volume

• When a company chases after added sales, it often results in unprofitable, lower margin business.
• Most efforts to increase sales include running promotions, hiring additional sales staff, or cutting prices, all of which are costly and eat away margins.
• Combining discounted profit margins with increased selling costs is a surefire way to end up in bankruptcy.

Fat Margins’ systems are based on research findings drawn from studies completed by over one hundred top-notch sources, including:

• Prestigious universities such as Harvard, MIT, and Yale.
• Consulting firms such as Bain & Co., McKinsey, and Simon-Kutcher Partners.
• Subject matter experts including Dan Ariely, Dan Kahneman, Amos Tversky, William Poundstone, and Chris Anderson.

The research findings clearly show that most businesses benefit most by concentrating their profit improvement efforts in three areas:

1. Better targeting of prospects and increased retention of those prospects that become profitable customers.

2. Elimination or restructuring of relationships with unprofitable customers.

3. Improving pricing skills.

Key findings that prove the need for better prospect targeting and customer retention:

• 80% of a company’s sales and 80% of its profit come from about 20% of its customers! The 20% that provides the sales is NOT the same 20% that provides the profit! In other words, some of the highest volume customers provide little or no profit, while some lower volume customers are highly profitable.
• A 5% reduction in customer turnover will usually increase a company’s net income by 25% or more.
• Most customers will pay a 10-15% price premium for good service.
• A referred prospect is fifty times (not 50%) more likely to buy than a prospect found any other way; the sales cycle time is also cut in half.

Key findings that prove the need to eliminate unprofitable customer relationships:

• Most companies subsidize 15-40% of their customers…
• They actually spend more out-of-pocket to make the sale and maintain the customer than what they profit from the relationship. So for example, they might spend $3 for every $2 they take in.
• Eliminating relationships with customers that cost more than they’re worth will increase a company’s net income by 25% or more.
• Need proof? Check out the Coast Distributing Company case study.

Key findings that prove the need to improve pricing skills:

• Price is the key determinate of business profitability.
• Even a 1% increase in price can increase bottom-line net income by at least 11%.
• To see what effect price and cost changes have on your company’s profitability, take a look at the Effect Of Price/Cost Change Worksheet*. Here’s how it works:

• Enter the current data from your company’s financial statements into the worksheet. You can make changes to it (raising/lowering prices, gross profit percent, fixed costs, etc.,) and see exactly what effect the changes would have on your company’s profitability.
• To find out how well your company is currently pricing its products and services, take the Fat Margins Pricing Proficiency Assessment*. Again note, a 1% increase in price will increase net income by a minimum of 11%.
• 96% of businesses mis-price their products and services.
• 92% undercharge and 4% overcharge.
• Most businesses let large amounts of cash slip through their fingers because they charge too little for their products and services.
• 80% of companies use price discounting as their primary marketing tool. Nearly every one of them is going broke. Matching their prices will put your company out of business too. The key to long-term success is to learn to compete using tactics other than price cutting.
• Less than 25% of a company’s customers buy primarily on price.
• 90% of sales people offer discounts without being asked, needlessly giving away profit.
• 96% of price complaints aren’t about price. They’re an easy, face-saving way for a prospect to say no without having to disclose their real reason(s) for not buying.

For a business to sell for maximum market value it must offer prospective buyers 2 things:

1. Consistently increasing profit and cash flow.

• Most unprofitable businesses are worth little more than the liquidation value of their assets minus their debts. A marginally profitable business is obviously worth more and will command a higher selling price.
• Goodwill, which contributes a major portion of the price in a sale, will not be received unless a company is able to demonstrate its ability to consistently maintain, and preferably increase profit over time.

2. The ability to operate independently, without the day-to-day involvement of its owner.

• Prospective buyers who are willing to pay full value for a company are looking for an investment, not a job. They may, or may not, want to work day-to-day in the business they buy and expect that the company will have a management team in place to operate it. Without such a team, no buyer is going to pay for goodwill.

When your business is able to satisfy these two requirements, you’ll be paid far more for it than you will if your company cannot fulfill them.

To get an idea of your company’s current market value and how much it will appreciate if its profit rises, try the Business Valuation Template* and see for yourself.

Only about 1 in 20 businesses ever become truly profitable.
According to the U. S. Small Business Administration, 65% of new businesses fail within their first five years and only 12% survive ten years. And 75% of those businesses that do survive never become truly profitable.

The overriding objective of Fat Margins is to increase sustainability in currently profitable businesses and help turn the number of failed and marginally existing businesses into thriving, profitable businesses, pushing them into the top 5% of all successful businesses out there.

Regardless of how profitable your business is right now, applying the principles taught by Fat Margins will significantly improve your company’s bottom-line and market value.

* Entering your information into any of the templates on FatMargins.com is completely confidential. Fat Margins’ personnel and others cannot access or view your company’s financial information.

Click here to read Chuck Moyer, founder of Fat Margins, Biography