Unless you run a non-profit organization, you’re in business for the purpose of earning profits. Profit improvement is a pretty universal goal for business owners, but it’s often elusive.
It doesn’t have to be that way. Through my consulting practice, I’ve learned that earning greater profits is easier than most people realize.
If you’re interested in improving your own company’s bottom line, the following is a list of seven areas to look at first:
- Fire the “loser” customers. With all the competition out there, we all know that it’s sometimes difficult to obtain customers. After having put in time and money for marketing and sales efforts to get your customers, it’s very hard to think of voluntarily “firing” them.
The reality is that some customers out there aren’t worth having — customers who take up too much of your time compared with the profits they generate, who consistently fail to pay on time, and/or who always want more but don’t want to pay more.If customers cause more headaches than benefit, then you don’t need them! Concentrate instead on replacing them with winners.
- Do an expense shakedown. Take a weekend, shut yourself away from distractions, and scrutinize each and every company expense. Look carefully at phone expenses, insurance costs, magazine subscriptions, dues to professional organizations, etc.
If the expense doesn’t contribute to your company’s profitability, eliminate it. Comparison shopping is also a good idea when it comes to telephone or cellular phone plans, suppliers, or even interest rates on company credit cards.If you take the time to thoroughly go through your company’s expenses, you’re just about guaranteed to find areas in which costs could be reduced or cut out entirely.
- Raise your prices. This may seem like a drastic, even dangerous idea, but if you’re taking good care of your customers, chances are you won’t lose a bunch of them just because you increase your prices.
The key is to differentiate yourself from your competitors with better customer service, quality, etc., and make the difference clear. Most people are accustomed to the idea of getting what they pay for.
- Train your customers to pay. The costs of having customers who pay late are significant (including time spent collecting money). You can still provide excellent customer service and maintain good customer relations while instituting a firm collection process. The key is to start a consistent procedure, and make it clear that’s how you do business.
If you wait until 15 to 30 days after the due date to ask for payment, your customers learn that 15 to 30 days after the term is when their payment is reallydue. On the other hand, if they get a call from you three days after the payment is due, they quickly realize that you expect your customers to live up to your terms.
- Keep a “Why do we do it?” list. Ever wonder why you do something a certain way? If the answer is, “Because we’ve always done it that way,” you’ve probably found a time- and-money-waster in your business. Look for areas where changes can be made or that can be completely eliminated in order to save money.
One of my clients was preparing five different reports and distributing them to the management team. When questions were asked about the numbers in the reports, it became clear that no one really read them or used them as a tool. The simple solution was to create a one-page report with only necessary information. Time saved: Two weeks per year.
- Market purposefully. Marketing is expensive. In an atmosphere of hot competition, it can also be critical to your company’s survival. You need to make sure your marketing dollars are well spent.
If you hire a marketing firm and don’t feel comfortable about what they propose, don’t think their proposal fits your company image or, more importantly, don’t think it fits the prospects you want to reach, then don’t spend the money and look elsewhere.With marketing dollars, you need a tangible ROM (return-on-marketing). If your marketing strategy isn’t justifying its cost, replace it with something better or stop what you’re doing and save the money until you can figure out a better solution.
- Ask for more business from current customers. Some of the most overlooked sources of additional sales are current and past customers. Look at your customers as low-hanging fruit. Educate them about all that you can do on their behalf and ask for more business. Chances are you’ll get it.These seven steps don’t involve making painful choices, such as reducing staff. If you focus on them, you’ll see your profits grow. Vistage Associate and speaker Laddie Blaskowski is president of BusinessTruths Consulting, Inc., based in Colorado Springs, Colo.