Growing Profit is normally one of the principal goals of business and we have a mass of advice to assist with this goal.
Streamline your existing operation in 100 days through optimisation and then GROW it again in a year by increasing Revenue.
Your journey to increased business Profits is a 3 step process:
1. Work out your destination: Your goal of increased Profits (see the following)
2. Optimise what you have: Tune your business to operate as efficiently as possible (see the articles within Profit Accelerator and Profit Toolkit)
3. Go for Growth: The speed and direction is determined by your destination (see the articles within Profit Accelerator and Profit Toolkit)
Every Manager has a number of 'Levers' that they can 'pull' to Grow Profit.
Profit Savvy collects and distills out the best advice on how to use these LEVERS to advance the Goal of improving YOUR BUSINESS' PROFITABILITY.
The Levers include such things as Marketing, Sales, Human Resources, Accounting....
This advice is made available to you in a manner designed for busy Business Operators:
- Choose quickly.
- Implement the best and most applicable Profit Growth Levers.
A. BUSINESS PLANS, STRATEGY AND GOALS
Articles to choose from:
- Planning Snippets:
Do you really need a Business Plan?
Track your Competitors.
- Generate a Million Ideas in 30 Minutes:
This technique is useful if you are conducting a Brainstorming Session with others.
Generating the ideas.
Pruning them down.
- Measure Impact with a Sensitivity Analysis:
The process of determining the impact of a particular variable on the overall performance
- Business Tuneup Menu:
A great periodic review of the state of your business with a view to streamlining and removing poor practices that have crept in over time.
- 80/20 Decision Making:
Business operators are constantly making decisions - large and small.
The 80/20 Rule suggests tools that help with faster, better, smarter decisions.
- Business Plans:
Many businesses will benefit from having a Business Plan at some of the stages of a business's life-cycle.
A business that is fast growing, in a troubled state or mature and steady stage to name a few.
- Boston Consulting Group Growth Share Matrix:
BCG Growth/Share Matrix is a quick way to visualise what activities are going to be the most productive and which are dogs, best to eliminate.
The Matrix can be used for growth potential, market share options, growth products, staff productivity and new business opportunities.
- Diffusion of Innovation AKA Crossing the Chasm:
Customers will adopt new technology and products with greater or lesser speed,
This is a valuable marketing aid and also a warning to be careful when looking at marketing results
- Goal Setting:
Goal setting is the most important part and first step of any new business or project.
Until you can clearly define a set of Goals, further effort can easily be misdirected down unprofitable avenues.
Once defined, any particular effort being contemplated can be tested for value by asking, "will this contribute to our Goals?"
- Rapid Planning:
A project plan is critically important to ensure that everyone involved is on the same page.
They don't need to be complex. This article demonstrates a quick way to assemble a practical project planning framework.
- Business Life Stage:
- What Business to Start:
If you are aiming to start up a business, you are making a long term commitment of time and money.
Choose a business/industry likely to maximise your Wealth but operating within your level of comfort and resources.
- Feasibility Test Your Start Up:
A lot of Startup businesses use a Ready-Fire-Aim approach!
They start and cross their fingers that it will work out.
The Lean Startup methodology takes a different and incremental approach so that you can systematically test the proposed new business.
- Theory of Constraints (Retail):
The Theory of Constraints (TOC) argues that good growth can be achieved by focusing on the one or two limiting factors or “Constraints” in a production system.
This article applies TOC to the Wholesale/Retail sector.
Protection, Structure and Advice
- Intellectual Property:
Intellectual Property (IP) is the term given to Intangible Assets that have a value such as brand names, internet domain names, written materials, artwork and the like.
Depending on the nature of your business, these can have considerable value and add a lot to your wealth.
- Business Legal Structures:
The best form of Legal Structure in which to place your business is something you should get legal advice on without doubt.
It is important that you think about what you want from your structure, when you brief your legal advisor, you will have good idea what you want.
This article is a series of points to consider when setting up a business structure.
- Choosing Professional Advisors:
You might be inclined to think Professionals – Doctors, Accountants, Lawyers – are pretty much the same in quality but that is not the case.
- Risk Management Systems:
Everything a business does is risky to some extent. It’s one of the things business people have to live with on a continual basis.
Learn about Risk Management Systems in this article.
B. SALES AND MARKETING
Articles to choose from:
- Line Extensions:
The term Line Extensions refers to making a number of variations of an original product in order to create more sales
- 80/20 Sales Growth: Double Sales, Triple Profits:
The 80/20 Rule is readily applied to your sales team and processes.
This article outlines ways to improve sales performance.
- How 1% Price Change Could Give 20% Profit Increase:
Price is a major determinant of the profitability of your business!
A price change of as little as 1%can often lead to profit increases of up to 20%.
This article outlines a 3 step approach to Pricing.
- Theory of Constraints to Optimise Sales Funnel:
The Sales Funnel is a well-known method of describing the several layers that a possible customer needs to pass through en route to becoming a customer.
The Theory of Constraints (TOC) is an optimising technique that can show you the very first place you should look at in your Sales Funnel for maximum increase in sales and ultimately profit.
- Sales Funnel Recipe:
The Sales Funnel concept refers to the process of tipping sales "leads" into the top of a "funnel" and progressively moving the leads down the process of converting them to a sale at the bottom of the funnel.
- Maximise Customer's Lifetime Value for Profit:
Many businesses fail to understand the tremendous multiplier effect on their profit that properly grooming their clients can offer.
One of the most powerful multipliers on your profit is the Lifetime Value (LTV) of a customer - Average Purchase x Frequency of Purchase x Purchasing Lifetime.
- Search Engine Marketing Channel:
If you have a website, it can act as a passive marketing tool for you by drawing people to your site via search engines like Google.
The process of getting eyeballs to your website via search engines is known as "Search Engine Optimisation" (SEO).
- Website Tuneup:
When you designed your website, it probably represented the "state of the art".
Over time, you will have fresh insights into what works, your competition on the search pages will change and your product emphasis may change.
Periodic tuning can keep your website healthy and doing its job. This article provides a list of activities to get more out of your website.
- Website Design:
There is an entire industry focused on Website Design, Profit Savvy provides you with some of the things to take under consideration:
Choosing a Designer; Producing Search Engine Candy; Meta Tags; Writing Copy; Google Analytics.
- Adwords for Strategy:
An alternative and very useful way to use Google AdWords is to test the viability of proposed new business directions on the internet.
Properly used, AdWords can bring buyers to test pages where you are testing new products, methods, prices and any other variable that you are uncertain about.
- Powerful Marketing with Google Adwords:
The Google AdWords service offers you both a marketing media and a laboratory to test your marketing ideas.
Test the potential direction and viability of your start-up business and proposed new business directions.
For a comparatively small cost, you can quickly get enormously valuable insights into your actual or potential market.
- Website Metrics:
What gets measured is what gets done!
This is an old truism in business.
Measure the most important information for your website so that it is regularly re-tuned to move your business in the direction you want it to go.
C. PEOPLE AND PROFITS
Articles to get the most out of the people connected to your business:
- Redundancy Planning:
Reducing the staff head count in a business is never a pleasant task - on either side of the desk. However, it is often a fact of life in business.
Reasons for Redundancy; Keep the Right People on the Bus; Broad Cuts First in a Redundancy Plan; Who Goes, Who Stays; How Deep do We Cut; Managing the Process.
- Human Resources Article:
Human Resources are one of the most essential elements of any business.
This article gives snippets of advice distilled from many sources that we think make a valuable contribution to understanding how to select, motivate and lead the staff that will take your business to success.
- 80/20 Staffing:
Labour costs are typically 50-70% of your Operating costs, anything you can do to improve Labour productivity is a good thing.
The 80/20 Rule can be applied to the issues around staffing so that your business can operate as effectively as possible.
- Streamlining Organisation Charts:
In an organisation of any size, that has been around for a while, your Management Organisation chart will most likely have a bad case of bloat.
This Profit Savvy article looks at how you can trim your management tree down to its former trim glory.
- Change Management for Profit:
Most people don't like change!
You can't change much just by yourself. Changes you do implement have a disconcerting tendency to revert back to the old method as soon as you focus on something else.
Under this topic we collect references to many Change Management techniques that will help you with your implementation.
- Staffing Your Business:
People make your business function!
Prominent business writer, Jim Collins, says that the first step for a successful business is to "get the right people on the bus".
This article collects wisdom on staffing related issues.
- Staff Bonus Plan:
Read this if you want to know more about how bonuses should be constructed to drive the goals of the business.
Many bonus systems are not well thought out and don't help to improve the things the owner/operator really wants while costing money and raising the expectation of the staff.
Learn about a whole range of techniques you can use to to construct a workable set of goals for your business that focus on achieving what you want.
- Hiring Staff:
People are probably the most important contributor to your business so getting the right ones on board will be a critical determinant of your business' success.
This article distills the wisdom of many to suggest a process to improve staff selection.
- Parkinson's Law:
Northcote Parkinson, writing in 1955, semi humorously proposed his ‘law’ that “Work expands to fill the time available for its completion”.
This is very true.
Staff will often take as much time as is available to them to work on a project even though that might mean unnecessary embellishments.
- Peter Principle: Promotion to Incompetency:
Laurence J Peters, in his book “The Peter Principle” (Peters & Hull, 1969) argues that people are likely to be promoted until they reach a point where they are unacceptably incompetent.
At this point, they are unlikely to be promoted any further (at least in a well ordered organisation) because they are no longer competent and so remain at that level indefinitely.
The great worry about this is that they are incompetent at this level, the organisation is impacted by the presence of these incompetent people.
You First: Your Contribution to Profit
There are straight forward ways of reducing the 4 main contributors to stress and they do not take very long to implement.
This articles shows how to convert “distress” to “de-stress”.
- De-Stress Video:
Watch this short 11 minute video on how to reduce the four main sources of stress.
- Double Your Personal Productivity in Under Two Weeks:
There just never seems to be enough time in the life of a manager to get all the things queued up in front of you done.
Do you know that feeling?
It doesn't have to be like that though.
Two simple skills can make you up to 16 times more productive!
- Your Life Plan:
The old adage that ‘money isn’t everything’ is very true.
Wealth, in its own right, is a pretty limited description of what goes together to make a life worth living.
In Profit Savvy, we stress the need for a clear sense of direction for your business by way of having clear goals.
This article covers similar ground for YOU.
- Personal Development:
Remember the old saying "physician, heal thy self".
You are going to be the 'main mover and shaker' in your business (Owner Operator or Manager), your business is only going to be as good as you are.
It would be a bit foolish if you worked on perfecting your business before you first worked on perfecting yourself and your life.
D. MEASURE IT: IMPORTANT DATA TO TRACK YOUR PROFITABILITY
- Daily Sales Outstanding Metric:
cashflow is the life blood of a business but it is a difficult thing to grasp as an abstract idea.
"Is my cashflow OK?" is difficult to answer.
The Accounts Receivable Daily Sales Outstanding (DSO) ratio, and its partner, the Daily Accounts Payable Outstanding (DPO) ratio, are crucial Metrics.
These two ratios help explain your current position and trends.
- Labour Efficiency Ratio Metric:
The cost of Labour is one of the largest overhead expenses in most businesses.
Any inefficiency here is an expense that must be recovered from the potential Profit of the organisation.
Labour tends to grow of its own accord, it is very difficult for the business operator to know just how Labour productivity is going as costs are rising.
The Labour Efficiency Ratio, discussed in this article, is an early warning alert if wages are moving in the wrong direction.
- Measuring Net cashflow:
- Positive cashflow gives you money to fund your Business Growth from your own operations without borrowing.
Knowing your cashflow allows you to plan affordable growth.
This article introduces Net cashflow and Marginal cashflow / Current Ratio concepts for measuring cashflow health.
- Metrics For Profit:
Metrics are measurement tools that a business puts together to provide feedback on its position on whatever factors it chooses to monitor.
The most common is the humble Profit and Loss bookkeeping.
The trick is to make sure that you are measuring the most important things and just not indulging in an array of 'vanity' metrics.
Money Management For Profit
- Reducing Variable Costs:
Variable Costs are those that are directly tied to your level of production.
If you produce more of an item, more inputs are required. If you produce less, you will have less Variable Costs.
Especially in a Manufacturing business, the variable cost of parts, resources and energy etc are likely to be a substantial part of your overall costs.
This Profit Savvy article is a collection of short topics relating to managing and reducing these costs.
- Wealth Protection Recipe:
Your business is likely to represent a big part of your personal wealth.
Getting your wealth together is a lifetime of work, the last thing you want to happen is to lose it because of some foolish decision or unexpected event.
In this article, we look at a number of the issues you should be aware of and plan for.
Protect Your Capital; Tax Minimisation; Insurance; Making a Will; Family Breakup; Retirement Savings; Intellectual Property; Risk Management.
- Accounts Receivable Management:
Managing Accounts Receivables is mission critical for any business because it is the process of collecting money from clients that owe you.
Many businesses fail because they don't manage Accounts Receivables well.
- The Compound Interest Accelerator:
Compound Interest tells us that the longer the period you have placed an investment for, and/or the higher the rate of return or interest on that investment, the more it will amount to if you keep reinvesting the interest.
And it will grow faster and faster over time (referred to as exponential growth) not just in a straight line.
This article gives examples and lessons to be learned from this relentless growth.
- Throughput Accounting (TA):
TA comes from the same stable of business thinking as the Theory of Constraints (TOC) and is a different way of accounting for business success.
It shines a different light onto things such as where to best invest your capital when you have several options to consider.
Waste (Muda) Reduction
- Eight Types of Waste:
The well-known Toyota car company identified seven types of waste that had an impact on Productivity and Profit. An eighth has been added more recently.
By gradually reducing these wastes, you can improve the Productivity and Profit of your business.
In Japanese, this is referred to as reducing "Muda" (pronounced Moo-da).
This article discusses how these types of waste might show up in your business; and what to do about them.
- Capturing Waste in the Wild:
Once you get on the trail of waste out in the wilds of your production system (service, retail or manufacturing) you are going to find literally hundreds of examples of waste.
It's too much to hold in your head, you need a simple way to find, measure and record it for later prioritised removal.
- Prioritising Waste Removal:
Any waste removal project will identify literally hundreds of instances of waste.
There is a serious risk that such a vast quantity of information will overwhelm the business operator’s ability to manage it in the best interests of the business.
This article discusses ways to identify the most important wastes to remove first.
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