How robust are your profits?

You can almost guarantee that if you open a paper today there will be numerous stories about businesses still suffering during this turbulent economic period.

So just how do companies remain profitable during these hard times?

l First, ensure that the information you have about your business is accurate and timely so it can be shared with the whole of the business.

l Use this information to focus the minds of everyone in your business to sell more units and increase the profit of each unit.

For example, you need to know the number of units sold each month, the average price per unit sold, and the average cost of producing each unit. The same applies if you sell a service – calculate the number of hours of your time you have sold, at what price and at what cost.

l Once you are fully aware of the cost per unit, you can explore reducing your costs and improvements in efficiency.

l Use the same data to monitor and measure the changes you make. Understanding the profitability of each product or service sold will enable you to focus on selling the more profitable lines.

l Examine & justify all the costs in the business. Ensure as much as possible ( and reasonable) is passed on to your customer and reduce unnecessary costs such as scaling back on those liquid lunches or walking instead of getting a taxi.

l If a large proportion of your business’ costs are fixed, and therefore cannot be reduced, then the answer may be simply to sell more. Fixed costs won’t increase with increased production, so the cost per product will be reduced and profits will rise. There can however be a trade-off if you have to reduce prices to increase sales.

Everyone in your business can contribute to improving profitability, so make sure the data is easy to understand and share. A few simple graphs on the wall that compare volume sold, price and cost to some challenging but achievable targets will help significantly.

Need to drive up your profits? My 2 hour ‘Business Health Check’ is the answer. Contact Janette on 01403 733671 or visit www.whitneyassocs.co.uk for more information.

By Janette Whitney ACIB MCMI of Award-Winning Business Consultants, Janette Whitney & Associates