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 helpful strategies to help you grow your profits this winter:
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! It’s a new decade, so try it out and observe the reactions.
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, instead of just agreeing to discounts. 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 with a little bit of practice!
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 periodically to meet market forces. You’ll need to plan regularly to earn the margins you desire. Sometimes it takes some halftime strategy adjustments to make sure you get the margins you need by game’s end.
Analyze Your Products/Services
Do an analysis of the products and services that you’re selling regularly, at least once each year, or more, if possible. Nows a great time since it’s the beginning of a new year. 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 immediately.
Analyze Your Customers
Dig into your customer base and understand who is buying, how often, and what do they buy. 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! Having a better understanding of your different customers and their habits will lead to improvements in more areas than just your profits.
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. Learning a new way to manage your inventory might have you rolling in the snow – eh, dough. 😉
Talk to An Experienced Coach
Profits don’t come from the profit fairy, you have to work at your business to get to the level of profitability you require. Put some time into analyzing your margins, and your profits during the year, and make intelligent adjustments based on your review of the data. When you identify products and services that are delivering strong margins emphasize them. When your analysis reveals that some of your products or services don’t generate sufficient margins, fix your pricing model on those products or services, or de-emphasize them in your marketing and sales campaigns. Common sense indicates that you need to sell the things that make you the best margins more often and sell less of the things where you cannot make good margins.
Michael is the founder and CEO of Michael Beach Coaching & Consulting, an award-winning business advisory and leadership development coaching firm. Michael is passionate about developing great leadership abilities in Emerging Leaders so that they can one day go on to found great entrepreneurial companies or ascend to the C-Suite leadership level one day. Keep an eye out for Michael’s new podcast, “What Are You Doing?” in which the conversation will be geared toward developing strong leadership at all levels and will help Senior Leaders to understand how to invest in developing Emerging Leaders and will equip Emerging Leaders to invest in themselves to speed their journey to Greatness.
Interested in a development program for yourself or your team? Contact us! We offer a free 2-hour consultation.