I recently prepared my profit and loss account and realised, again, that turnover does not equal profit and that cash flow is king. There are 5 obvious ways to increase profits and although they are obvious, it is worthwhile sitting down once in a while and analysing your business performance for each point. So, can we:-
1. Raise our prices? Difficult one this. First of all, always be aware that it is nigh on impossible to raise your prices if you start by giving a discount. You can justify raising your prices if you can show that you have added value. Otherwise this point may be more about looking for other markets in which you can offer “nicer” and “better” for a higher price.
2. Lower the cost of sales? This requires you to look for ways of delivering faster, less expensively. Can you automate or buy supplies in volume?
3. Focus on the profitable and drop the underperforming? It is very tempting to try to be all things to all customers, delivering bespoke time and time again because each sale is a one-off. Delivering everything at just above margin is not as profitable as scaling up to deliver effectively on your profitable products and services.
4. Increase volume? Many clients tell me that they want new customers without thinking about ways to sell more to their existing customers. Who can you sell more to? It doesn’t preclude you finding more customers so also consider who else could you sell to?
5. Lower overheads? Investment in a business is fine, for example a nice office or full-time receptionist. To be realistic, you also need to be firm about when you take the decision that your forecasts do not justify your level of overheads. Be tough about planning for growth and your actual sales trends. This item is last for a reason. It should be considered after all of the other activities. It may be hard to cut back on staff but it is even harder to regain credibility with those remaining if you have to re-hire later. Are there any other mechanisms you could use? % commission based rewards? What flexibility can you build into your operations?
The Week. On Monday I was in London talking through my service offering on client retention with an M&A consultancy, followed by a meeting with another consultancy who are interested in leadership coach training. Tuesday was the Masterclass for the Coaching for High Growth Programme. Places still available for high-growth businesses who are interested in grants which supply business coaches. www.sjic.co.uk. Wednesday to Friday at home catching up with lead nurturing, marketing both Highflyingdivas www.highflyingdivas.com and the Leadership Forum. The HFD Forum meets on Monday in Chelmsford http://hfdcm.eventbrite.com where I am sharing how RACI and GRIP can help you and your business and in Westminster London on the 19th April http://hfdlon.eventbrite.com. Leadership Forum is planned for Chelmsford 26th April http://lfcm.eventbrite.com.
Reading for the week. As it is the end of the month, I refer you to the whole month’s recommended reading.
My husband James came home yesterday with the question “Have the supermarkets become the new family outing in these times of recession?”. He then went on to ask why wives felt the need to drag their husbands out with them and in many cases, their entire families to do the weekly shop. Can they no longer afford to go to the Zoo and instead a day at the supermarket offers interest and excitement? I have to admit he has a point. I recollect the struggles of maneuvering my wayward supermarket trolley on its squeaky wheels around aisles to find deposits of little children happily sitting on the floor on their amply padded bottoms gazing in wonderment at the shelves of colourful boxes and tins. Clearly beats taking them to the cinema. After negotiating the shalom of children you are greeted with the friends reunion of small groups chatting pleasantly about the weekend. Once past these you are into abandoned trolley territory, where half-filled and fully laden receptacles wait patiently for long-lost drivers. Owners have decided that the middle of the aisle is a perfect parking place for their moving shopping basket whilst they wander off to peer at product labels one or two aisles away. I do sometimes envy them as a stationary trolley awaiting my return would be a welcome sight. James, being the man, has control of the trolley and likes to dash up and down the aisles with race-track cornering whilst throwing items in the general direction of the basket. Woe betide me if I decide to collect something from another aisle. For then, I am left wandering up and down the aisles searching for my errant husband and the disappearing trolley. I have a strategy of pausing at the end of each aisle searching for a glimpse of his racing figure. I would perhaps have more luck if I just followed the trail of grumpy shoppers he leaves in his wake.
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