As 2017 came to an end, you might be thinking about ways to increase profits of your business in 2018. If growing your profits is important to you, then this article is written for you!
In this article, I will ask you a series of questions. These questions are centered on the most basic and the most significant profit drivers for any business:
- How to change Pricing
- How to increase Sales
- How to reduce Costs
- How to improve Efficiencies
By answering these questions, it is likely you will get several ideas on how to grow your profitability in 2018. Remember, growing profits does not necessarily mean you have to work harder – you just have to work smarter.
Here are the powerful questions in each of those areas for you to ponder and answer:
- Changing Pricing
- When was the last time you made increases in your pricing?
- The last time you increased pricing, how did it affect your business? Did you lose any customers because of it?
- What is your company’s net profit margin? If you increased your pricing slightly (by 2 – 5%), what would happen to your net profit margin?
- Are you doing a lot of discounting? If you are discounting, do you think it’s helping your bottom line (by increasing sales) or is there a chance you’re just giving money away?
- Do your salespeople sell on price, or are they clearly articulating the value of your product/service to your customers and earning business through increased quality and/or increased service rather than commoditizing your product/ service?
- As your own costs of doing business have risen, what have you done with your own pricing to be able to maintain your margin (or improve it)?
- Is it time to consider raising some or all of your pricing?
- Increasing Sales
- Are your salespeople earning new business, or have they settled into just being “order-takers?”
- Do you have an effective Selling System, or “Sales Model,” or are your salespeople flying by the seat of their pants?
- Are you actively courting a list of “Top-10” prospective customers (or clients), or are you ignoring the larger prospective accounts that could make a big difference in your sales revenue?
- Do you have systems in place to follow-up with lost customers to earn back their business?
- Are your salespeople digging deep to determine what other products/services you could offer to your existing customers?
- Are you earning a favorable return-on-investment from your marketing efforts?
- Is your marketing message fresh and relevant, or are you just using the same text you’ve always used?
- Is organic sales growth your best strategy moving ahead, or is it time to consider the pros and cons of buying a competitor to gain market-share?
- Reducing Costs
- “Labor costs” are always significant. Are you fielding a team of superstars, or do you have some people on your team that are probably not a great fit for your team?
- Are you currently overstaffed? Sometimes, companies have people on their teams who aren’t able to fulfill their entire job duties, so they hire additional people to shore up those weaknesses. That results in bloated payroll. Are you currently employing extra people to make up for the weaknesses of people on your team?
- What would happen to your profitability if you were to invite a poor-performing employee to find another line of work where he/she may be more successful?
- Are you competitively bidding the products/services that you purchase on a regular basis, or are you being blindly loyal to vendors you’ve used for years? (Personal Note: I’ve personally been on the receiving end of paying premium prices from “friends” I was loyal to. I’m not saying don’t be loyal to great vendors, I’m just suggesting you shop around to make sure you’re not being taken advantage of.)
- What is the least profitable product or service your company offers? Is there anything you can do about that? (Conversely, “What is the most profitable product or service your company offers? Is there any way you can sell more of it?)
- Where do you have expensive waste? What systems can you put in place to greatly reduce or eliminate that waste?
- Look at every expense line on your income statement, then ask yourself, “How can we reduce these expenses?”
- Do you have any unprofitable customers? What should you do about that?
- What services are you currently outsourcing a lot of that may make sense to bring in-house?
- What services are you currently doing in-house that may make sense to outsource instead?
- How is your employee retention? How much is employee turnover costing you? What can you do about that? (Better interviewing systems including reference checks, better training programs and mentoring for new-hires, providing cross-training opportunities and opportunities for professional advancement, etc.)
- Is there a less-expensive way for you to finance your debt?
- Are there any legal strategies you can put in place to reduce your tax liabilities? (Personal Note: You may want to have an accountant who is not your primary accountant take a look at what you’ve been doing. A second set of eyes may pick up on something your primary accountant has overlooked.)
- Improving Efficiencies
- Do you have recurring errors in your business? If so, how can you improve your training or your systems to make sure those costly mistakes get eliminated?
- Could technology updates (or new technology) help increase efficiencies?
- How could you streamline your company operations (in every department) to reduce wasted time?
- How could you improve your planning in order to maximize your efficiencies?
- How can you eliminate mistakes?
- How can you improve communication between the different departments in your company to make sure everyone is working together and helping reduce wasted time? Would updated systems help to do that?
- Does your company have formal training programs for new hires and continued learning opportunities and cross-training for existing team members?
And now, the most powerful questions of all:
- What are the profit-killers in your business that you know you should fix, but haven’t had the time to address?
- What are you going to do about it NOW?
This article is not intended to be comprehensive. It is only intended to get you thinking and perhaps spark a few ideas to help you make 2018 your company’s most profitable year.
I wish you all the best,