(Time to read this article is about 2 minutes)
A recent Biz Coaching client needed to triple their profitability, but didn’t know where to start. To help clarify their profit growth options and create a Profit Improvement Plan, I created the following 14 profit possibilities, some of which will be helpful in your business or department.
Note: Understanding the ‘math of profitability’ can have a profound impact on your business. Many business owners and managers believe they must make big improvements in their business to make any real difference on their bottom line. The opposite is true. Small improvements in pricing, sales or operating efficiency can make a huge difference in our profitability.
Sit down with your accountant and work through the numbers to show how increasing prices by just 2%, or increasing sales by 5%, or reducing operating expenses by just 5% will impact your bottom line. You’ll have to make some assumptions as you work through this …but that’s what you get paid for.
Below is my list of 14 ‘Profit Improvement Possibilities’:
- Improve the quality, performance, ease-of-use, consistency, dependability and joyfulness of the products, services and experience that we deliver so that we clearly differentiate ourselves in our overserved and largely undifferentiated market. In other words, what do we need to do to deserve the loyalty, increased sales and improved profitability that we want?
- Change or drop any arbitrary policies or shady, deceptive, manipulative practices that are ticking off or confusing customers and prospects.
- Come up with at least 5 specific ideas on how to increase sales of existing products and services to existing customers (see idea #14 for how to get your Team to help with this one).
- Come up with at least 5 ideas on how to increase sales of existing products and services to new target customers (see idea #14 for how to get your Team to help with this one).
- Offer additional products, services and experiences to existing and new customers. Make sure that these new products, services and experiences are congruent with your existing brand promise and personality. Ask, what additional ‘help’ might our target customers need or want?
- Drop unprofitable products or services if they can’t be made profitable by improving their value, delivering them more effectively, advertising and promoting them more effectively, or by increasing their price. Also, drop unprofitable customers if they can’t be converted to become profitable. Especially in B2B situations, often your most problematic, high-maintenance, energy sucking customers are losing you money and frustrating your staff. Kindly suggest that some other supplier might better be able to serve their unusual needs.
- Increase prices where possible. Make sure your value and customer experience merit the higher price.
- Reduce prices on any over-priced products and services, if this will increase revenue. Over-priced items or services make you look bad across the board.
- Reduce operating expenses by improving systems and efficiencies in ways that will not impair customer value, the customer experience or the employment experience.
- Communicate with existing and prospective customers more proactively and effectively by building and adding value to your relationships with those people or businesses. Become their ‘Caring Coach’ through your website, Blogs, proactive electronic reminders, social media, signage and 1-on-1 helpful conversations in person or by telephone.
- Create clear expectations and agree on performance commitments with your staff, individually and as a team…then measure performance.
- Acknowledge, thank, celebrate and reward performance and commitment. Creating a culture of commitment, acknowledgement and celebration improves sales, engagement and retention….all of which improves profitability.
- Deal with toxic or non-productive employees now. Either they improve, or they’re asked to leave. Get the documentation right to avoid messy and expensive departures.
- Ask your Team for their thoughts and ideas on how to improve sales, efficiency, clarity, commitment, communication and profitability. Your people know stuff and they hate it when you don’t ask. Be sure to include front-line people. They know what’s really going on.
You can get the Team’s input by meeting with your people individually, or you can create an ‘Idea Fest’ and ask each Team member to bring at least one idea on how to increase sales and operate more efficiently, consistently, safely and joyfully.
For a more effective ‘Idea Fest’, divide your Team into groups of not more than eight people. Whether meeting with them individually or in an ‘Idea Fest’ group settling, give them a week’s advance notice to collect their thoughts. In these conversations, no putting down others’ ideas will be allowed. That kills creativity and willingness to speak up. Listen respectfully. There’s lots of time later for analysis and evaluation. Be sure to ‘thank’ your people and, later on, let them know about how you’ve implemented some of their ideas. They want to know that they’ve made a difference.
So, which of these 14 ‘Profit Improvement Possibilities’ will work for you and when will you start taking action? For every action that you commit to take, get specific about what will be done, by whom, by when, at what cost, measured how and rewarded how. Timely and effective implementation are key.
For info about booking Donald to deliver his bottom-line insights on management, marketing and profitability at an Industry Conference or Corporate Event…or to discus our Business Coaching program, contact us at firstname.lastname@example.org or by phone at 1 (416) 252-3703 in Toronto, Canada.