5 Simple Strategies to Improve Profits Quickly
Business seems good. The orders are coming in but the stress level skyrockets when you have to make payroll or pay your suppliers on time. You want to improve profits quickly. The natural reaction is to get more business. More business should solve all cash flow problems, right?
This might be the answer some of the time but answer to better cash flow could be right at your finger tips. I often suggest to my clients that they ensure they are as profitable as possible with their existing business before spending time and resources finding new clients.
Here are 5 strategies to improve profits quickly and increase cash flow
- Benchmark against competition. You may be charging too little and leaving profits on the table
- Increase prices regularly. Customers expect inflation. They will better accept small price increases on a regular basis than a large increase every few years. Chances are your costs are increasing and you pricing needs to reflect this
- Monitor/control discounting by the sales team. Have firm controls in place. Giving discounts should be very painful for sales people.
- Add surcharges ie. Fuel surcharge. If you are in a business that requires driving to serve a customer a fuel surcharge can dramatically improve gross profits. People are use to this. Just keep it reasonable.
2. Review process to minimize labour waste
- Scheduling/planning. Plan your labour needs to be sure workers are not sitting idle.
- Eliminate unnecessary steps. Review your production/ service process to eliminate steps that are costing you money. Dig deep, you will be amazed how labour costs are bleeding your company.
- Clearly defined goals and expectations. Staff needs to understand what is expected of them with clearly defined production goals. They will often rise to expectations you have set.
- Develop KPIs to monitor productivity. Decide on the measuring tools you need and keep a close eye on labour costs. Ratios measuring labour to sales is an easy and effective KPI.
- Outsource if not enough work to justify position. There is nothing more wasteful than idle labour. If you can’t keep a full time person busy consider higher part timers or out sourcing.
3. Review production process to minimize waste
- Build a waste factor into your COGS. Do you throw out unused product? Be sure you build a waste/spoilage factor into your product cost.
- Develop KPI to monitor waste factor. Measure and monitor waste levels on a regular basis. Investigate when something seems “of”.
4. Itemize & cost every component of the product
- Incidental labour. Break down your production/service processes into every step needed to complete. Ensure that all of your labour is accounted for in your costs.
- Be sure any supplies used to produce your product/service are factored into your costs.
- Include all cost related to packaging in your costs. This includes labels etc.
5. Ask For Lower Pricing From Suppliers
- This is often over looked by many businesses. You will be surprised on how much money you can save by asking for discounts.
I have many tools at my disposal to help my clients with any of the above strategies. I encourage you to take advantage of my free 60 minute strategy session where we will focus on building a laser focused strategy to take care of any business challenge you are currently facing. Feel free to call me at 604.374.5934 or email firstname.lastname@example.org.
Tony Malyk, Vancouver Business Performance Coach