Having a good understanding of crucial influences on your profitability will help keep you focused on winning rather than just ‘being in the game’.
Here are five ways to improve the ‘bottom line’:
- Fix any leaks: Be sure that existing customers aren’t leaking away – don’t try to fill the
bucket at the top if there’s a hole at the bottom! - Find the right new customers: Not all business is good business; make sure new customers will generate profit now and in the future.
- Understand your costs: Be ruthless with any costs that don’t contribute to customer value.
- Improve productivity: Some businesses waste up to 30% of labour costs through ineffective management systems: how good are yours?
- Increase your prices: You’d probably lose revenue, but the question is how much, and how would this affect your bottom line? If you operate at 30% Gross Profit (GP) and increase your prices by 10%, sales can drop by one quarter before the actual £ amount of GP drops. Conversely, a 10% price reduction would necessitate a massive 50% increase in sales just to keep your GP figure from dropping!
Businesses looking to assure their future profitability will choose customers carefully, understand how they make their profits and balance their portfolio to generate the best profit from a mix of existing and new customers. Getting these five things right will help ensure that your business enjoys above average profits in its marketplace.
If you found this post useful, here’s five more ways to make sure you really make a profit.