18Apr 5 Ideas To Maximise Your Profits!
52% of UK executive directors said they could not think of one thing their company could do which would immediately improve their profitability! NOT ONE THING!
Those scary statistics come from some research carried out by Cranfield School Of Management with 200 board level managers with companies with revenue of more than £710 Million ($1 Billion). we see it in lots of businesses where ‘profit’ is often not discussed, and clearly, in many, not understood!
Our research shows that winning businesses take a Dramatically and Demonstrably Different approach (It’s a key ingredient in 3D Characteristic #6: KeeP In Control!). They create a profit focus, establish clear routes to profitability and engage their people in understanding and contributing to making it happen.
So, what options do you have to improve your profitability? The reality is that there aren’t many! Don’t worry, that doesn’t mean you can’t do it! It means you’ve got to chose the appropriate options for your business. The basic options that your business has to maximise profitability are to increase margins or to increase volumes… the reality is that it’s usually a combination of both.
Here are the basic ‘options’ you have…
Option 1: Reduce Your Costs…
In today’s very competitive marketplaces, most businesses already run a tight ship, and therefore the opportunities to significantly reduce overheads may be limited. However, that doesn’t mean you shouldn’t look closer at your overheads. Start with your major costs, and then move through the others. (Warning! Don’t spend vast amounts of time and effort ‘penny pinching’ for small gains. If you’re not careful it ends up costing you more than you save!). Talk to your suppliers. Find out how they could add value to your business. Again, review your major costs – are you getting the best value? Can you negotiate better deals? What would you need to offer in return? Remember, cheapest isn’t always best. A great question to ask your suppliers is “How could you add value to our business?” and see what they come up with!
Option 2: Increase Your Prices…
Could you be / should you be charging more for what you do? Well, put your prices up! Or maybe put some of your prices up – when was the last time you did it? Review your prices (especially your ‘discounts’), establish a pricing policy and set some targets. If it’s difficult to get prices up with existing customers, consider establishing a new pricing regime for future sales and work. Be imaginative with your pricing – adjust for seasonality, availability, time, date, type of customer. Be adventurous, and be brave. You know you’re worth it!
Think about your options – What more do you need to do / offer to get prices up, and increase your margins? Think about any low cost (to you) extras, additional support, advice and help that add to your ‘offer’ that cost effectively increase the overall value of what customers receive.
Also, find out if there are things that you provide that customers don’t really value – focus on these. If they are not adding value, then they are adding cost – hint: ask your customers – create some dialogue!
Option 3: Increase Efficiency…
This means increasing the speed at which you turn, for example, £1.00 into £1.50. Look at your production methods; Are there opportunities to improve? Could technology help? Do your people have any ideas? Get them involved, generate solutions, and improvements.
Can certain tasks be done by someone who earns less? For example, accountants, lawyers and others in professional services often use junior, or less experienced people to carry out certain tasks (whilst maintaining the quality of work, of course). Look at your own role – how much time do you spend being an overpaid administrator? Significant gains can be made by getting more efficient and effective at what you do as a business. The impacts on profitability tend to be longer lasting. Keep working at it. Imagine the power of a business that gets better every day.
Identify the things that ‘go wrong’ in your business and work out how often it happens and what that’s costing you per year in terms of time, resource and money – it’s called the Cost Of Waste and it’s a great way of ‘amplifying the pain’ – now work out what you need to do to fix it. Establish your key generators of errors, waste and complaints, educate your people, inspire (and reward) them to eliminate the causes of errors and waste – engage them!
Option 4: Sell More To Your Existing Customers…
This is all about maximising your customer relationships – that does not mean ‘bombarding’ customers with ‘junkmail’, discounts or the ‘heavy sell’, but targeting your offers, and your efforts. Develop a pro-active programme of education.
Get closer to your customers, find out what they think, want and need. Establish the % share of their spend on the sorts of products and services you supply that you have. When do they use you, when do they use your competitors? Why is that? Are there opportunities there? Identify opportunities to sell on. Be imaginative – find ‘excuses’ to talk to and visit customers. Keep in touch, (Get back in touch!) add value, develop relationships.
If you’ve got different departments, establish ways to encourage and increase ‘cross selling’. Discover what other products / services your customers are purchasing – is that an opportunity for you? What do customers want? What would they pay more for? Start with your existing customers.
Can you ‘leverage’ your relationships? Who else in their organisation might have a need for your products / services? Generate referrals. How? Ask for them. Develop a proactive approach to creating referrals. Can you / should you reward and incentivise your current customers for loyalty.
Option 5: Create More Customers…
Do you have a proactive focused approach to creating new customers? Are you generating sufficient new leads and opportunities that (eventually) will create opportunities and sales – with the sort of customers that you want? Do not just sit back and wait for the business to come in. The chances are, it won’t. It’s important to establish a business generating system that creates leads and new customers – the time lag between first contact and ‘orders’ can take time, so start now!
Proactivity and targeting are the key. Start by looking at your ‘best’ current customers. What does ‘best’ mean for you? Why do those customers buy from you? What’s important to them? How can you find more like them?
Establish which new markets make sense for you. Stick as close to your core market as possible, initially, and work outwards. Do your research. Allow time. Develop a plan and set targets. Again, set up a proactive lead generation process and stick
to it. Don’t take your eye off the ball from your current customers.
So, those are the options! Obviously, they mean different things to different businesses. Your challenge is to explore all these Routes To Profitability, establish a unique ‘recipe’ and Profit Improvement Plan for your business – tip: involve others, get their ideas and input!
We’ve developed a 3D Toolkit called Create Your Route To Profitability to help you do this and you can download it for FREE (No, that doesn’t go against our advice – it’s us ‘adding value’to you as a friend of ours!)
Just click on the icon to…
And finally, it’s worth pointing out, in the words of Henry Ford… “A business that makes nothing but money is a poor business.” It’s true – but you do need to make some!
Do let us know below any strategies and tactics you’ve used to improve your profitability – it’s good to share!