How to shake up your profits

When you have identified and measured your key profit drivers, you should develop strategies to grow them... without increasing costs. Making your business more profitable involves looking at ways to increase sales revenue as well as decreasing your costs and benchmarking your business to see where you can save money. The Business Minder can help.

Good systems and processes will help you minimise errors and make it a policy to learn from mistakes and improve your systems as you find ways to work smarter. It's a good idea to review your systems at least once a year to see where improvements can be made. Don't forget to seek the input of staff as well to make sure your systems and processes are the best tools for the job.

Focusing management awareness on profitability can have a dramatic impact. The most commonly used key performance indicators (KPI's) are

• actual sales against forecasts

• costs against budgets

• gross margin

• staff costs

Get help from your accountant to ensure you're monitoring the right indicators for your business because staff tend to work towards them if they are critical for the business or not.

Encourage senior staff to delegate simple tasks to more junior staff who could do just as well. This will free up time for senior staff to focus on directing the business.

Monitor and measure your employee performance and productivity and reward productive employees by linking pay and other benefits to effectiveness. It's important to praise and thank staff when it's due, to keep motivation high.

Good planning helps you to anticipate problems and adapt as circumstances change and allows you to set goals and measure performance. Set measurable, time-limited targets to monitor how effectively your plans are implemented, Review what you've achieved so you can learn from your experience and make continuous improvements.

Set up systems that encourage the communication of best practice in your business. For example, benchmarking different parts of the business against each other can be a useful way of identifying and sharing best practice.

Improve communications with your customers and suppliers – they can offer useful tips and advice. Your customers will be aware of any problems and can tell you what you need to improve. Avoiding customers you know have complaints may simply make matters worse and mean you lose the opportunity to improve your business.

You should also prioritise the strategies you've chosen to improve your profit so you can focus on the most important ones.

Strategies to increase sales revenue

• Increase productivity of your staff - recognise and reward staff contributions with staff performance reviews, and teach them sales skills and how to upsell products so customers make multiple purchases at one time

• Develop new product lines - survey your customers about new products

• Find new customers - new customers can help grow your business

• Find new markets - use market research to determine if you could expand your business into new areas

• Customer service - improve your customer service and develop a staff training program

• Increase your prices - check if you have priced your goods and services correctly and if you could increase prices without reducing sales

• Price discounts - consider price discounts and promotions to increase your customer base (e.g. 2-for-1 deals or happy hour)

• Retail displays - use effective retail displays to increase your sales

Strategies to decrease costs

• Decrease inventory - stock control is a good way to streamline your business

• Decrease direct costs - make sure you have the right suppliers for your business andnegotiate for better prices or discounts for buying in bulk

• Decrease indirect costs - for example, try to minimise waste and errors in your business by training staff, or reduce marketing costs by using low-cost marketing techniques

• Decrease overheads - for example, save energy wherever possible or try find a cheaperenergy supply company

• Benchmark key financials - benchmarking your business helps you compare your costs (like rent and utilities etc.) to similar businesses in your industry to see if you are paying too much

Prioritise your strategies

Once you have chosen strategies to make your business more profitable, you should prioritise them in order of importance. It's a good idea to write down your goals and the corresponding strategies to achieve them, and also how you plan to implement your strategies.

Introduce counter cyclical products

If you have a slow season, think about introducing counter-cyclical products or services to your core business to generate incremental profits and cash flow. One company that sells floor-based heating systems (with a traditional slow summer sales season), introduced a de-icing product that could be sold and installed during the summer. They added $80,000 to their bottom line in the first year of the new product.

Take action

A very wise person said that hope is not a strategy. Take action when needed. Don't let problems linger. If you made a buying mistake, don't hold on to the product. Take the hit and get it out the door so you can generate cash to buy or produce products that will sell.

Look around you

Find out what the leaders in your industry are doing. As long as they are not direct competitors, most are willing to share ideas. Join a peer group that shares numbers, not just war stories. I know many businesses that are alive and flourishing even in today's challenging times because of ideas and insights they gained from such groups.

Think outside the box

Look outside your industry for ideas. We all can learn lessons from how other industries and business models are going through these times. The New York Times has an excellent online series called, "How I Saved My Company" that features videos of business owners sharing how they got their companies through the recession.

Focus on your more profitable items

Your products or services with the highest gross profit margin are the most important to your business, as they generate more money. Once you have identified your most profitable items you should concentrate on achieving higher sales targets for them. This may require you to rethink aspects of your business or to devise strategies for improvement.

Consider using Mind Ur Bisnis - The Business Minder to help you. Don't delay - Call or message me today! The Business Minder operates in ASEAN countries with clients in Singapore, Malaysia and Bali Indonesia.