For many businesses, reducing costs is almost always the solution to improving profitability. Although finding the means to do so can sometimes be a challenge. Evaluating and eliminating unnecessary overhead costs, can see a dramatic improvement to your business’ bottom line and therefore profitability.
Review your supplier – Many businesses use the same supplier for their products throughout the life of their business. It is important to regularly review your contracts with suppliers and negotiate lower prices where possible. A second approach would be to shop around for a supplier with the best deal. We live in an extremely competitive market with businesses popping up all the time; so you should always be on the lookout for other suppliers offering the same quality product, at a cheaper rate.
Evaluate procedures – Ensuring your current systems and procedures are up to standard, and creating new systems for tasks without them, are of high value to any business. Having specific methods for tasks will help you minimalize errors, and reduce the time and money it takes to complete the job. It is important to constantly review your systems to avoid making the same mistake twice. If you notice an error or fault in the procedure, have it altered and make everyone aware of the amendment to promote continuous improvement in the company.
Keeping focussed – Keeping your management team focussed on your goal of increased profitability and making the entire team aware of the importance of profitability should be a priority. Key performance indicators (KPI), (such as measuring actual sales against predicted sales) are a good way of monitoring your employees’ progress towards reaching your goal. If you are unsure of the right KPI’s to monitor, you can book an advice consultation with me to discuss your best options.
Rewarding your team – It is important to reward productive staffs who help you reach your business goals. You should also ensure all staff have a clear career path to help them stay focussed on reaching their next target.
Continuous Communication – Your suppliers and clients can provide you with useful tips and advice about your business and will be aware of any glitches in your systems that can be improved. That’s why a continuous form of communication with both clients and suppliers is an essential aspect in improving profitability.
If your business offers a multitude of products and services, you can divide them into four categories to assist you in increasing your overall profitability (shown below).
High % of sales with high profit margins – nurture these items
High % of sales with low profit margins – consider a price increase
Low % of sales with high profit margins – consider a sales push
Low % with low profit margins – eliminate these where possible
The material and contents provided in this publication are informative in nature only. It is not intended to be advice and you should not act specifically on the basis of this information alone. If expert assistance is required, professional advice should be obtained.
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