Every business is different, but every business owner wants more profit. Here are our top tips for taking a fresh look at your business profitability.
It’s hard when you’re busy to think about this, but take 10 minutes a week to call the competition of one of your suppliers. This is a great first step to profit improvement. You don’t have to move, but it pays to know what the competition is charging – even if you go back to your current supplier and re-negotiate. That 10 minute call might save you hundreds of dollars.
This is particularly true for the telecommunications and power companies – it’s easy to shift, and there are websites which help with the comparison (powerswitch.org.nz).
Work out a good measurement of your team costs (eg ratio of wage costs to sales), then benchmark that to what others in your industry manage to see whether you’re doing well or badly. If you’re doing well, reward your team! A happy team is more productive and makes better decisions for you and your business.
If you’re behind the industry norm, fantastic, this gives you a great opportunity to save some money and probably create a better team environment. In terms of the ‘how to’, you could start with:
- Draw up an organisation chart – often confusion about roles and responsibilities creates overlaps
- See if you can determine your good performers versus your poor performers by specific measures – incentivise and reward good performance, train and manage poor performance
- Talk to your people and invite feedback on improvements. Often people are sitting on great ideas that they haven’t shared because they haven’t been asked!
- Write a programme of change, in consultation with your team, what do they like, what works, what wastes time?
- Make sure everyone has a contract and a job description – partly because it helps with productivity but it is also the law.
Keep monitoring your people costs at regular intervals to see if positive change occurs – if it doesn’t, ask why not – and be honest – sometimes the problem is us!
Everyone wants more sales and it’s a tough world out there. There’s no quick fix for long term turnover growth and profit improvement, but here’s a few things to think about:
Check Your Pricing
If you’ve been charging the same for years, maybe it’s time to ring around your competitors and find out if you’re above or below the market. Either is fine as long as it’s part of your strategy. You can be lower to target a particular market or higher because you offer a superior product. Just make sure that you’re not offering a high price with lower quality or vice versa.
Find Out What The Market Is Doing
You in a growth market, a shrinking market or a static market? It can be very useful to know if you’re going with the trend or against it. You may need to refresh or bring a new product into your range, or change direction entirely (like the carriage makers at the start of the 20th century, learn to build a car, or die).
Talk To Your Customers
They’ll tell you what they like and don’t like – listen to their comments and change your offering to suit your market.
Be The Same, Then Be Different
It helps if you can stand out from your competition – pick an attribute that is your shining difference and highlight it.
Check you’ve got the right ACC code – you can sometimes be on the wrong code and it’s too high.
Be ruthless with advertising – if you always advertise in the paper, analyse whether it’s working. Sometimes advertising accumulates (the Yellow Pages, the local A to Z, a local flyer magazine) without you consciously thinking about whether it’s really working. Stand back and take a good look.
Put surplus funds on deposit – don’t leave money in your current account.
Check your loans/borrowing – if you have credit card debt, get rid of it if you possibly can. Pay off HP or credit cards at high rates using a bank loan.
In other words, give your accounts a spring clean, I guarantee there’s stuff in there that you don’t need or you’re paying too much for! And if I’m wrong then you can still feel great about that warm glow of satisfaction.