Reducing operating expenses is often more powerful than modest investment rate increases. |
This calculator will help me illustrate the power of reducing operating expenses and recapturing dollars you are currently losing. Let’s look at the impact. |
OPERATING EFFICIENCY IN PERCENT The math on this screen is explained in the following example. Assume the following inputs: •Annual Operating Expense of $1,500,000 •Annual Outside Investment of $ 6,000 •Annual Outside Investment ROR of 6% •Reduce Expenses by 1% The annual growth on $6,000 at 6% ROR is: .06 X 1,6,000 = 360. A 1% reduction in expenses is: .01 X 1,500,000 = 15,000. This $15,000 reduction in expenses is divided by the annual savings of $6,000 to find an effective yield: 15000 / 6,000 = 2.5 = 250%
OPERATING EFFICIENCY IN DOLLARS In the case of a fixed dollar reduction in expenses, as opposed to a percent reduction, the fixed dollar reduction is divided by the annual savings to find an effective yield. For example, •Annual Operating Expense of $1,500,000 •Annual Outside Investment of $ 6,000 •Reduce Expenses by $ 1,000 This $1,000 reduction in expenses is divided by the annual savings of $5,000 to find an effective yield: 1000 / 6,000 = .1667 = 16.67% |