I was on a call with a client yesterday and asked them what impacts their revenue the most?

They have a new website that they’re feeding over 1.5 million visitors to a month and monetizing that traffic through advertising. There are a bunch of technical levers that we could pull to increase ad impressions: improve site speed, optimize the mobile ad display, work on pages per visit, and etc. But while we were going through these, they mentioned that they’re sourcing advertisers through a reseller that takes a 30% cut.

30% is a huge bite of revenue.

I was backpacking with entrepreneur friends last year and we ended up in a conversation about accepting credit cards. My perspective on it had been that it improves the customer experience and saves admin time in processing checks. Theirs was that it’s essentially giving 3% of your profit away. Their perspective is more useful.

A healthy business should run between 10% – 20% profit. If your business is near the 10% range, 3% credit card fees are a third of your profit.

Both 3% and 30% are significant. They’re passive leaks that tax the wealth the business should be generating.

Businesses tend to accumulate resources that are net negative in value. When your aim is to grow profit, you need to identify these and cut them. Sometimes there are opportunities for big jumps in profit like the 30% reseller fee, but often it’s a matter of cutting several tiny percentage points across a variety of costs to come up with another 5% in profit.

Featured image is of Octavian who was one of the earliest to tax using percentage points by taxing 1% of all public auctions. By Giovanni Battista de’Cavalieri (1583) provided by Biblioteca comunale di Trento., and used under CC0