Financial Management diligence makes a huge difference for a business. When your Gross Profits and your Profit Margins are not where they need to be, it is time to take action, with URGENCY, to right the ship! Don’t delay, do it today! The amazing thing is that the changes you need to make are all relatively easy to make, and they impact your bottom line immediately, in a very positive way! Every decision maker, from the owner of a small start-up to the CEO of a multi-national conglomerate, needs to work with accounting information to make the best Gross Profit decisions. Here are some dandies:
Prices: Increase your prices. When was the last time you increased prices, 2008? If so, you should increase your prices now, and monitor the reaction and the results. Most business owners are TERRIFIED of doing a price increase, but modest or slight price increases often are met by no negative fallout or negligible reaction. The positive impact of your current and future profit margins is anything but negligible, it’s often HUGE!
Discounts: Get discounts under control in your business by implementing some discipline with your sales leaders and sales team. Discounts are a tool, like any other. Tools should be used with a high level of maturity. Add more value to your offering as an alternative to agreeing to deeper discounts. Ask customers which items or features they’d like you to leave out so you can offer the discounts they’re demanding. It’s a great idea to discuss your responsibility to make a profit with customers. You’ll often find that they don’t expect you to sell products and services to them at a break/even or loss basis! Trust me, this works!
Calculate: Calculate your current profit margin on high volume items if you haven’t done so in a while. You may find that you are not helping your bottom line because you’re not getting enough margin. Make adjustments as necessary, and things will get better quickly! Intelligent business owners know that they have to adjust prices to meet market forces and that you need to plan to gain the margins you desire.
Analyze: Do an analysis on the products and services that you’re selling regularly, at least once each year, or more, if possible. Focus your entire marketing and sales effort on the most profitable products, services and solutions that you offer. Why would you want to focus marketing on solutions that do not generate higher margins? Sell your most profitable offerings more often, and your margins will increase.
Analyze: Dig into your customer base. Consider emphasizing efforts to market and sell more frequently and more deeply to your most profitable customers. De-emphasize or eliminate efforts to sell to the least profitable customers, until you can develop a plan to restructure your profit profile for that customer. It sounds very difficult to do, but often fixing this is as easy as one or two quick changes!
Inventory: Manage your inventory more closely and watch your profit margins increase naturally. Eliminate stagnant inventory immediately by liquidating obsolete or aging inventory before it’s too late and becomes a total write-down. I’d rather convert inventory into a few quarters than write it down and get pennies’ worth of tax benefits for it later.
