Many small business owners mistakenly focus too much on growing sales. They think if they can land that big new client or get a new product to market this will be the making of their business. Too busy chasing the sale they lose focus on what matters most, PROFIT. The only way to grow sustainably and scale, is to increase profits.
1. Take stock
First of all is to take a step back and look at how the business is currently performing and operating. The reality is most small businesses don’t have accurate up to date numbers and insights. Therefore do not know how their business is performing. This goes further than the standard financials, profit and loss account, balance sheet and cash flow statement.
Every business should have Key Performance Indicators (KPI’s) which measure how effectively the business is achieving its key objectives. These insights could be sales targets, retention rates or customer satisfaction levels.
A starting point is pulling together what data you have readily available. Look at the financial position of the business. Working with an advisor will help you assess the current health of the business and what areas need focus moving forward. A good advisor will also help you spot opportunities to excel and increase profits.
Perhaps you have employees who you feel are not pulling their weight. Investigate this and pull together some data that supports your theory. Such as past performance reports.
Now that you have an idea of how the business is performing financially and operationally. To increase profits you may have to rethink your current strategy.
Perhaps a product is not selling as expected, a team is underachieving. Or you are getting better results from somewhere unexpected. It is time to consider what change is required to keep you on track to achieving your overall objective. For many small businesses, the normal overriding objective is growth. This comes in the form of sales, profit and cash. A bigger brand, staff and premises can come along at the same time.
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3. Streamline costs
Once you know your numbers and key metrics. You will be able to identify and cut unnecessary expenses. Also the ability to remove costs which are not moving you towards your goal.
Perhaps you could be getting better deals from different suppliers, have staff who are not efficient. Or running advertising campaigns that are not delivering results. Consideration needs to be taken. O
A wise approach is to consider all costs an investment. If your expenses are not driving sales, either directly or indirectly then they should be removed where possible.
4. Grow sales
To increase profits we don’t just want to sell more. We need to sell more
If you are a service based business you can do this by attracting more higher value clients. Who know that you can provide value and tick their boxes. An example could be the plumber who can do the same job as his competitor, even slightly cheaper, but can’t fit the new bathroom for 3 months. However, you can start within two weeks. The client purchase factor in this example is time. They want the bathroom fitted asap as they have family visiting soon. Find your prospects hot buttons and provide
If you sell a product you can also sell more wisely. When demand outweighs supply price can increase. Therefore you need to focus on creating high demand. Again this means getting your product visible, standing out from the competition. Being a must-have item, and easy to purchase with limited supply to the
5. Systemise and measure
Going back to point 1, it’s important to get the right systems and processes in place to run the business at optimum efficiency and measure performance. Every business has
Having relevant and regular financial reports with non-financial data such as KPI’s. Which are interpreted correctly will help spot opportunities and plan for what lies
This is when working with an advisor who deeply understands your business and can help you interpret your key data can really add value and increase profits.
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If you would like to increase profits in your business we offer a free informal consulation. We’ll have a coffee and discuss how our programmes can help your business move forward fast!