For a Better and More Profitable Business – Here’s How
Plan & Budget
Plan to achieve a great profit and don’t leave it to chance or to your impulse.
You should have a realistic and achievable plan that can be expressed financially as a budget. You should also have a robust performance measurement system that tells you promptly whether you’re on- track, off-track or drifting somewhere in between. Your measurement system doesn’t need to be a complex one but it does need to provide up-to-date information to allow you to track actual performance to your plan and budget and to draw your attention to areas requiring intervention, remedial action or improvements.
Sales & Marketing
Know your products and services well and also the market you operate in. Understand the dynamics of your market. You need to keep your fingers on the pulse and ears to the ground to understand the vibes, the trends and changes that affect your customers purchasing behaviour and to respond to them with a degree of precision. Your sales should be growth driven – how do you drive your sales up in terms of volume and value? You also need to support your sales with modern marketing methods, systems and ideas. What methods and systems do you use and where do you get your promotional ideas from? Do you use online technology that now has enormous market reach?
This subject is often overlooked yet is very important to both your sales and profit. What pricing method do you use? Many business operators still use the cost-plus method by simply adding a profit margin or mark-up to the cost and that’s the sales price that’s supposed to attract sales volume and deliver good profits. The cost-plus method of pricing products and services is very outdated. It’s totally inadequate to rely solely on this method in today’s business world. The cost-plus method does not maximise potential profits. This means that you need to work harder to make really good profits. To price profitably you need to understand the concepts of customer value perception and competitive pricing strategies. Do you understand what value is to your existing and potential customers? What do your customers perceive as value as opposed to what you perceive as value? Are they different values? What do you do to maximise your customer’s perception of value to enhance your profits? Do you know how to price competitively? To operate a profitable business today you need to understand these mutually reinforcing pricing concepts.
It goes without saying that all business owners need to manage costs or expenses to a greater or lesser extent but what’s more important is the need to know which costs to manage more closely than others, when, how and the overall implications of these actions have on your business profits. It’s all too easy to cut costs to improve profits but such could be false economy. It could start a decline in both sales and profits e.g. cutting marketing and promotional expenses or reducing expenditure on strategic management advice or electronic systems. It’s also helpful to understand cost behaviour as it allows you to manage costs more efficiently. A good advisor can assist you to manage costs to maximise your profits.
The foregoing may appear daunting to some people in business but to bring it all together you only need to systemise these processes so they work like clockwork for you to have a better and more profitable business. Systemisation can achieve not only efficiencies and cost savings but also productivity. Systemisation has been greatly simplified and improved by computer technology.
As with most things financial, discipline is absolutely essential – it’s the key. Most business people try to be accountable to themselves but few can apply the necessary discipline because we are, by human nature, not a good taskmaster of ourselves. We are not good at assessing our own performance and improving it so it’s better to engage an experienced advisor who will keep you on the straight and narrow to achieve positive results with greater certainty. If your advisor is experienced you should more than recover his or her costs. Focus on achieving the net benefits and the costs should look after themselves.
If you need assistance to implement some or all of the above you should engage an experienced advisor – this is where we can also help. You should have an independent advisor working with you to keep your business on track and to help apply the discipline to achieve better business profits. Experience tells us that family members or friends are seldom suited to this role as it requires someone who is impartial and does not become emotionally involved or is too agreeable.
If you’re serious about improving your business and profits, ask us about our value-based services that targets growth, profits and cashflow. It’s customised specifically for your business.
Visit our dynamic website for useful content and free business tools. Enter your questions on our website page “Ask Mike” and get a prompt and useful response. Subscribe to our newsletters or follow us on Twitter or Linkedin. Become a client and you’ll get much more.