Spire Business Services Pty Ltd based in Port Melbourne and Warrnambool is a Xero Certified Partner delivering excellence in accounting, taxation and business advisory services with the purpose of helping small to medium businesses be successful and sustainable.
10 WAYS TO MAXIMISE PROFITS AND REDUCE CORPORATE STRESS
Your business is crazily busy with a healthy revenue and consistent sales and the general feel is that you have a successful business. Then it’s time to run a Profit and Loss Statement for the last month, quarter, 6 months or full year and the bottom line is not giving you that same feel. Your return on effort, investment, knowledge and skills (blood, sweat and tears) is not there and stress levels are rising.
If this is all too familiar for you then please read on. If you’re gaining success at the top and bottom of your Profit and Loss, then also please read on as there may still be areas of improvement.
When a business is not making the desired profits or in some cases it is making a loss month on month, there are a number of levers that can be pulled to turn this around. When reading this, know that not all are possible depending on the industry you are in and customers you have.
Increase your Sale Price by 2-3% – Depending on the climate of the customers and industry that you operate in this may be an easy step and accepted quite well from your customers.
Decrease Direct Costs – Go through all of your direct cost line items and identify processes that could be made more efficient, materials or services that could be purchased for less without a decrease in quality and legacy costs that can be stopped.
Decrease Overheads – Go through all of your overhead cost line items and identify where you could cut back on costs or get more bang for your buck. Is the space you’re operating out of too big and therefore costing you too much? Can you sublet some of your space? Can you get a better deal on electricity or your photocopier lease? Is your stationery supplier too expensive?
Maintain a healthy gross profit margin to support your overheads – This is a process that your trusted advisor can help you with for your particular business. The Australian Taxation Office also supplies small business benchmarks and the ability to do a Business Performance Check using the ATO App – https://www.ato.gov.au/business/small-business-benchmarks/compare-your-business-now/. Once the desired margin is determined this needs to be maintained at the point of sale. Yes, you may sell some products or services with a lower margin for a strategic purpose to win a customer or get into a particular industry, but this should be a one off and have the potential to win more work at your desired or higher margins.
Set budgets, Key Performance Indicator’s (KPI’s) and targets for points 1, 2, 3 and 4 and report on them regularly – DO NOT FLY BLIND. Have a report pack that you view every month and compare to the budgets, KPI’s and targets that you have set. This will help you fix anything that is broken sooner rather than later or reward staff on performance and motivate. Set KPI’s/targets for your staff that are tied to their remuneration or bonus structure.
Do a review of product lines or service offerings:
Is there a product line or service offering that needs to be discontinued due to low returns?
Is there a product line or service offering that you may be able to start offering that will earn you higher returns?
Is there a product line or service offering that can be improved or tweaked to increase its returns?
Do you need to diversify your product line or service offering more so that all your eggs are not in the one basket?
Do a review of your staff and their roles to increase motivation and find efficiencies:
Are there people underperforming that need to go?
Are there people that could do more?
Are there people that should be doing less and in turn be more motivated?
Are there tasks/roles that could be completed by one person rather than multiple people?
Are there any roles that can be automated using technology?
Are there roles that are not necessary?
Is there a role that may need to be created such as a General Manager or Business Development Manager role?
Increase and do better with your Business Development efforts
Reassess how you Promote your business
Lock down your proposition or offer
Increase your leads
Get better at talking to your leads, closing sales and asking for referrals
Do more networking
Look for new sectors or industries to move into
Look for opportunities to sell to your current customers more services and products and more often
Talk to your customers, know your customers and build relationships with your customers to know what they want or what you could do better. Keep them happy, keep them coming to you and buying from you.
Determine, lock down and stick to your Why, How and What. These should be communicated publicly and within your organisation. LIVE AND BREATHE THESE:
Your Why (Mission)? – Why do you get up everyday and go to work to run your business?
Your How (Values)? – What are your strengths and values that define your business and differentiate yourself from your competition?
Your What (Vision)? – What do you do and what do you want to become?
Prepare a detailed Strategic and/or Business Plan with your trusted advisor incorporating all of the above. Spire Business Services is always here to help you with any of the above. Please contact us to discuss further on 1300 978 320 or firstname.lastname@example.org.