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Improve Business Profits

You need to improve your profits. You are not alone.

 

Increasing your business profits isn’t as easy, or hard, as you may think. Here are 4 hints and tips to help you along your way.

Profit increase strategies

 

Your Turnover

This one is straightforward enough – concentrate on your best performing product/ service lines of revenue and your best, most profitable customers. It doesn’t make sense to spend 10 hours on a customer each month that spends £1k-£2k per month opposed to 0.5 hours on a customer that spends £15k with you each month.

 

Increase business turnover

Your Costs

Reduce all non-revenue making overheads to a minimum. If that means reducing your workforces hours in slack times, do it. It is better for them to have less money each month than to have the company go bust. Don’t pay yourself a huge wage. The company is more important than your 4 holidays per year.

Write a business plan for profits

 

Prepare a Business Plan

You should always have a business plan. It is your target to achieve. If you do not have a business plan, how do you know where you want to be in 6, 12 or 18 months? Write one now.

 

KPI’s – Key Performance Indicators

Benchmark everything of importance; Sales figures, staff productivity, revenue, profits. Then look outside of your business and benchmark similar businesses. How are they doing? If they are doing well, how can you replicate their success?

1 dash 1 helps businesses reach their full potential by assisting them with growth strategies. We know businesses and how to make them more successful.

We’ve been working with a firm in London this week reducing their running costs by way of improving their processes and an interesting topic came to light during our diligence.

A Bad Business Approach

The director of the ‘shall stay unnamed’ company (we’re confidential!) had reduced his marketing strategy to almost zero per month but could not understand why new customers were not flocking to his eCommerce site. Well, once we briefed him on the importance of not cutting costs in value added services such as marketing and PR because they grow the business (and revenues!) he suddenly wanted to know more. Like most companies, when it comes to cost cutting they instantly reduce their marketing, advertising and offers with the thought process of “It costs money so we need to reduce it”. Cost reduction strategies are all well on good in reducing ‘dead money’ e.g. utilities, wasted resources, costly overheads and processes but they shouldn’t be implemented on business growth avenues.

Think about it. Your electricity bill costs £1200 per month, we help you to reduce it to £900 per month and you save £300 per month – great!

Bad Cost Cutting Example

You spend £4000 per month on advertising and marketing which you halve to £2000 per month, a saving of £2000 per month? No. Its actually cost you £300,000 per year! Why? The £4000 per month was generating you £600,000 of new business per year which you have just halved… make sense? In actual fact you should be considering increasing spend on business growth!

Business Solution Providers!

We don’t halve your costs across every expenditure you have, we look at the big picture; Revenue streams, new business, overheads, etc. We don’t advise you to slash your potential growth; we may suggest a new marketing company that can assist your growth which provides better value for money but we do not impact your bottom line for the worse.

Cost cutting strategies

Improving efficiency is key to any business especially in tough financial times. Good business managers recognise this; Great business managers address efficiency and make it happen!

Efficiency, productivity and the competition are linked. Improved productivity equals increased efficiency which results in a higher level of competitiveness.

Efficiency and productivity

Efficiency is about using resources to their maximum potential. Efficient companies maximise outputs from given inputs, and so minimise their costs. By addressing efficiency a business can reduce its costs and improve its competitiveness & productivity.

There is a huge difference between production and productivity.

Production is the amount made by a company in a given time frame.

Productivity measures how much each employee makes over a period of time. It is calculated by dividing the total output by the number of workers. If a manufacturing firm employs 50 staff that produces 1000 toys a day, then the productivity of each worker is:

1,000 toys/50 staff = 20 toys

Chart displaying efficiency and productivity

An increase in productivity from 20 toys to 25 toys, without increasing costs, means the company has improved it’s efficiency. The result is lower unit costs and increased profit margins.

Staff productivity depends on their skills, the quality of machines available and management effectiveness. Productivity can be improved through traininginvestment in equipment/ machines and better staff managementTraining and investment cost money in the short term, but can raise long-term productivity.