From my desk

Where Is Your Profit Hiding?

I was reviewing the P&L of a mid-sized manufacturing company.

They were obsessed with topline growth. Chasing new accounts, launching new SKUs, hiring more sales reps…

But when I dug into the numbers, I found over $1 million in hidden profit just sitting there:

• Unused warehouse space they could sublease.
• Dead inventory tying up $200k in cash.
• Product lines with negative margins.

So we didn’t change a single sales target. We just fixed the leaks.

Within a year, net profit jumped 27% – not counting a single new customer.

Will I find $1M every time I look for hidden profit? Not every time.

But that experience certainly changed how I think about growth...

Why “Midline” Revenue Matters

Topline is sales. How much money came in.

Bottomline is profit. How much money’s leftover.

Ever wonder what’s happening in the middle?

Well, it’s where that extra money is hiding...

Tell me which you think is cheaper:

• Acquiring a new customer?
• Or increasing AOV for a returning customer?

9 times out of 10, it’s the returning customer.

Making a new sale is great. That’s what everyone wants.

But sometimes making money from what you already have is easier.

Here’s the lesson:

If you want to grow profit, start with what you control today.

6 Easiest Ways To Find Hidden Profit

Where can you unearth all this free money hidden in your midline?

It's limited only by your creativity.

But here are 6 tried-and-true ways I find hidden profit in a business.

1. Audit Product and Service Margins

Get a snapshot of all your products and their margins. Then do two things:

First, kill low-margin or negative-margin offerings.

Second, redirect those resources to your most profitable SKUs.

2. Renegotiate Vendor Contracts

Once per year, review every major supplier relationship.

Lock in better pricing based on volume, loyalty, or prepayment.

3. Reduce Idle Assets

Sublease unused space. Sell or repurpose underutilized equipment.

Always look for ways your assets can pay you twice: cash flow while you own it, value when you sell it.

4. Tighten Inventory Management

Where you have inventory sitting on shelves, you should see stacks of cash. You wouldn’t want $1,000 sitting stale, would you?

Eliminate excess stock and slow-moving items.

Move to just-in-time purchasing where possible.

5. Streamline Labor Allocation

Map out your demand curves throughout the year. Match staffing to those curves.

And cross-train employees to reduce downtime.

6. Eliminate Process Waste

Repetitive tasks → automated.

Long approval chains → shortened.

Decision bottlenecks → broken.

Profit gets tied up in process waste more often than operators realize.

How You Know You’re Unlocking Hidden Profit

It’s easy to know when you’ve made a new sale. In the messy midline, it’s a little bit harder to track your hidden profits.

Here are some clear-cut signs:

• Gross margins are trending up without price hikes.
• Cash flow improves even with flat revenue.
• Vendor costs drop after renegotiations.
• Inventory turns increase year over year.
• Labor cost as a percentage of sales decreases.

Remember:

Before you chase more, fix what’s already yours.