Practical Strategies to Boost Profitability

Coach Cynthia

Out of the 5 ways to increase profit, the most cost-effective place to start with is your profit margins. Remember, your earning comes from your profits, not your revenues. As my financial mentor Keith Cunningham says: “Sales is vanity. Profit is sanity. And cash is king!” 

The only reason to sell is to make a profit, and at the end of the day, the profit needs to be turned into real cash.

So let’s spend some time on smart marketing. There are 4 M’s that we need to pay attention to, namely: management, money, merchandise and marketing.

    •    Management. All the numbers in your financial reports originated from a management decision that was implemented through action. So your management is producing low-quality decisions, then this is the first place to look. How well do your managers (including yourself) understand business? Do they know what numbers to analyze before they make decisions? Are decisions usually ad hoc and based on feelings? Is your management team continuously developed to think and decide like business people? Do they have enough business acumen to do so? Are they making decisions for the betterment of the whole company, or just for their own departments? Do you have too many managers than you need?  Are you paying your managers too much for average performance? Are you spending too much money on salaries, instead of motivating their performance through aggressive variable incentives?

    •    Money. How you manage your money can save you profits. Poor money management usually results in poor cash flow, and that force you to borrow more money from financial institutions and pay more interest. What are your company’s policies around money? When do customers get invoiced and what are the payment-terms that need to be enforced? Do you have a monitoring system for outstanding payments? Are you collecting proactively? Do you need to review your payment terms to your suppliers? As they say, pay slow and collect fast. How do you reduce your cash gap by managing the time when your goods arrive and when they get sold?

    •    Merchandise. Usually businesses are distracted with too many products and services. So many to sell that no one in the team (including owners) seems to know which is the most profitable ones to focus on? Categorizing your products and services into ABCD categories in terms of profitability is crucial to building a profitable company. It takes just as much time to sell a profitable product as it does to sell an unprofitable one. Secondly, dead stock and slow moving stock are where your dead cash lies. Sell them off to create a healthier cash flow and improve profitability.

    •    Marketing. How you spend your marketing budget affects your profitability. Do you measure your marketing strategies to determine whether or not they’re generating results? I saved a business owner $5000 in one coaching session just by making him realize that his marketing strategy was in vain. Remember, marketing is math. Have you implemented enough and the right types of marketing strategies that will make a difference to your bottom line?

These 4 areas are discussed in very broad terms here. For more details, I recommend “Instant Profit” by Brad Sugars. It’s one of my favorite books with practical strategies to boost your profitability in a small and medium enterprise.

Have a great read and a profitable week ahead!

Coach Cynthia owns an ActionCOACH Business Coaching franchise that guides businesses to select & implement effective and cost-efficient marketing strategies to increase your business results with a proven 17-week guarantee. For a free business health check, go to www.acsj.co.id