More Profit?
3rd August 2009
I come into contact with many small businesses during my coaching and assessment work, and the dilemma at the moment is that they need to sell more, so they need more people, more equipment and materials to make their product. This however, adds cost, as does the marketing to sell more. For a bank to lend money they will want to be sure that you will generate that income and therefore your operations have to be well managed.
The key focus therefore at the moment is the architecture not the bricklaying:
1. Can you increase volume by selling more?
2. Can you lower your direct costs? – re-negotiating with suppliers to get a discount, but supporting them by guaranteeing you will put the order their way in the future. This increases your margin. Most of us are lazy purchasers and don't challenge our suppliers. The old adage ‘if you don't ask, you won't get'!
3. Can you lower overheads?
4. Will the market take a price rise? Great if you can get it because you are getting more margin, but often it alienates customers
5. MOST IMPORTANTLY do you have underperformers to fix? These could be suppliers, staff, or customers. Pareto's rule applies – what/who are the 20% that area causing you the 80% problems or costs?
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