What steps can you take to improve profits?
So, how do you make more money?
One of the things that you will think of is, I need to reduce costs, or I need to make more sales. This is true but you also need to know how they will affect your business. Will reducing costs mean that your customers don’t get a good service? Will increased sales increase my costs?
You need to understand the key parts of your business
If you want to improve profits you need to understand your business more than what you do now. You need to look at the parts which creates the money for you. These are called the Key Performance Indicators. For a lot of businesses this is the sales, right the more you sell the more you earn? These are the numbers in the accounts that tell you how well your business is performing.
These can be quite technical and difficult to understand
These can be the number and value of sales that you make. How much it costs you to make those sales. Are you wasting money and not controlling costs? How much in sales does each member of staff earn? How much does it cost you to get a new customer?
You need to look beyond the numbers in the profit and loss accounts and try to understand what they mean. These are important to understand so can see how your business makes profit.
KPI’s may also be non-financial
It is possible that the KPI’s may not actually be in the accounts. These can be the number of projects that you have in the pipeline ready to do. Things like customer satisfaction will be a key factor in your future success. Are you keeping your customers happy and giving them the quality of work that they demand? The quality of your staff that you have and can employ.
KPI’s give you an indication of what your future profits will be, the likely earning potential of your business. if you keep an eye on these and take steps to improve them your business and your profits will improve.
Focus and improve parts that earn you the most money
For instance, having better working practices in your business, better trained staff and having less wasted time in your business will almost certainly lead to more profits. You can put these into practice and make a dramatic impact on your business without spending too much money.
If you are going to grow the business that you have you need to be sure what you are focussing your time on, rather than acting without a plan.
There are things that you can do that will help which will not cost anything.
This is the information that you should be taking from the profit and loss accounts and using them actively in your business to grow and become more profitable. There are things that you can do, that take time but not much money that will have a dramatic impact on your business and make it more profitable for you.
This can make it a more enjoyable place to work and more satisfying to be running.