That may sound a little implausible – so how are you going to double your profits? By making just 5% – 10% improvements in a number of areas, you’ll see how it can actually increase your business profits, or even more – double them.
Too often, business owners forget about this basic relationship: you have to sell to more people, you have to sell them more stuff, you have to sell it at a higher margin, you have to reduce your costs, and if you just go to that very simple calculation you have profits at the end. If you work on each of the elements and just make a 5% – 10% improvement, you’ll see how that affects the bottom line and can double the business’s profits.
1. Increase Selling Prices:
Conduct an investigation of competitors selling prices and look for opportunities to increase prices. If your business has a range of products or services, you may find that only some of these products or services are operating in a competitive environment. There is nothing stopping you from just having a price increase, providing you can justify the increase and do provide great service. In most cases customers do not price-check the market. The price increase issue is usually in the business-owners head, rather than being a real thing.
2. Lower/Eliminate Discounts:
In many instances we have found businesses giving away discounts that are not required or requested by the customer. We find that in most cases service outranks price as a reason to do business. Limit or reduce giving discounts where-ever possible.
3. Lower Cost of Goods Sold (COGS):
You may want to conduct a thorough investigation of the cost of goods, or if your business is a service based business, the cost of wages or outside contracting. In many instances we have found that very little serious work is been done in this area, and significant savings have been achieved for the business. Negotiate lower prices, prompt payment discounts, table contracts, loyalty discounts.
4. Lower Wastage:
This is mainly the domain of a business involved in manufacturing. In order to make improvements here you need to have an accurate monthly measurement of the actual wastage and then develop strategies to reduce it.
5. Lower Variable Expenses:
The strategy here is to examine all variable expenses to find savings. Just the very act of conducting this investigation will find significant savings. Form a task force made up of team members to work hard in this area, and give them a target of savings to reach.
6. Lower Fixed Expenses:
Examine all fixed expenses to find savings, there always is if you try hard enough.
7. Lower Wages/ Salaries:
Conduct a total investigation of all positions and their responsibilities, develop a new organisational chart, looking for duplication of responsibilities. We have generally found that this process removes some positions. Payroll is usually one of the biggest outgoings of most businesses and significant savings are always hidden within it.
8. Increase Productivity:
Once a new organisational chart has been created and the responsibilities have been re-balanced, the actual output of each position can be measured and the Employee made responsible for achieving certain performance criteria which is used in the performance reviews.
Be steadfast in your resolve to focus on profitability and do this with rigorous common sense and discipline . Every business is sitting on loads of opportunities to quickly improve profitability whilst enhancing its connection to customers. What is standing between most businesses and significant profits may be a combination of inertia, too much group-think, and a lack of enlightened leadership