Fat overheads, paying for stuff you don’t need, poorly performing team members, blow-outs in your cost of goods sold and trying to flog products and services that the market no longer needs or wants, these are the Klingons off your starboard bow that reduce your profit. While they can seem threatening, here I’ve outlined THREE things you can do to boost your profits, and get you back on course for success and the prosperity you deserve.
Poor management can lead to cash leakage and that directly translates to less money in the bank. That’s less money to reinvest in making your business great and perhaps more importantly, for spending on yourself or building your personal wealth.
Most business owners know, or suspect, there’s money going down the drain but fail to do anything about it. In my experience, the business owners who manage their Profit & Loss and Balance Sheet effectively have the most profitable businesses and enjoy more personal and financial success.
#1 Measure & Monitor
Business owners who regularly review their P&L and Balance Sheet – daily, weekly, fortnightly, monthly or regularly enough to recognise changes in the numbers – are able to address problems that could be limiting their profits, seize opportunities for boosting profits and at the very least take a wait and see approach when it comes to emerging trends.
Of course, if your financial systems aren’t up to scratch, and you can’t access accurate and up to date financial data, it will be impossible to closely measure and monitor your profit, or any other financial aspect of your business for that matter.
Accurate, real-time financial accounting systems, preferably tailored to the specific needs of your business, are critical for measuring, monitoring and making decisions that can boost your profits.
If you aren’t financially confident, take heart. In 2000, Richard Branson famously admitted on CBS News that he can’t read a Balance Sheet either! The solution is to get professional help from those who can explain the purpose of your Balance Sheet and make it meaningful for you.
#2 Change your behaviours/Rework your processes
Of course, it’s not enough to just monitor and measure your numbers, you also need to make decisions and take action.
Sometimes these decisions can be tough and often involve changing your behaviours and admitting the things you don’t know. Leading change begins with understanding your numbers, knowing your break even and implementing profit benchmarks that you are committed to achieving, and preferably exceeding.
Business environments change rapidly. Products and services that you may have traditionally delivered may no longer be needed or wanted by your clients. Your team may be performing tasks that strip your profit and add no value for your customers. Reduced sales revenue combined with inefficiencies – poorly trained staff, old equipment and technology – can cripple profit. Reviewing and reworking your operations will increase productivity and efficiency.
Then set goals, share them with your team and implement KPIs so you can all celebrate getting jobs done faster, reducing waste, closing more sales, saving on expenses or achieving any other profit boosting outcomes.
#3 Implement the one-percenters
Boosting profit is about doing the small things well – ALL the time.
Implement clear systems, train your team, maintain equipment, compare prices, review established suppliers’ terms of trade (including your financiers), check your invoices before you pay them, and only hold the stock you need. The latter can significantly reduce your freight, warehousing and insurance expenses. Ask your customers what they want – it might be different from what you’re giving them. Imagine how your sales revenue could increase if you made more of a favourite colour, and how your expenses might decrease if you deleted a slow seller from your range.
Okay, so what’s your next step?
You’re busy and by your own admission, you’re better out the front of your business or working on the tools than out the back crunching numbers.
The problem is, without financial clarity you’ll never truly feel in control of your business or your future. At best, lack of financial understanding causes you to worry and at worst you’ll go broke, lose the business, burn relationships and sacrifice your livelihood and lifestyle too.
It all sounds a bit dramatic, doesn’t it? The truth is, it’s not that difficult to set up profit boosting practices in your business.
Step one is to understand that you don’t need to do this alone.
When I’m working with business owners, I analyse their numbers for them and explain my findings in terms that empower them to take action that will make a positive difference. Being an arm’s length third party providing these insights has many benefits, including fresh eyes that see things without bias, emotion or excuses.
Often my findings reveal short comings in systems, errors in accounting and easy fixes that require little effort to implement. With the facts in hand, I help business owners to develop then action their profit boosting plan.
Businesses are meant to make profits, it’s as simple as that.
If I can help you to boost profit, succeed in business and enjoy personal prosperity, please contact me on +61 2 9699 9171 or email email@example.com
For a bit of fun, check out this video – a parody of Star Trek by British group The Firm (1987).
(* “Star Trekking” by The Firm 1987)