It's important to remember that "profit" is just a result of a well-executed plan involving many actions in your business to gain more resources than you have invested.
Most business owners and executives with profit/loss responsibilities have the desire to improve their profit margins. Some have mastered the process and others struggle to know what to do. While there are many things to consider, here are five areas to review and consider to take action.
- Listen to your customers.
- Look to create value.
- Do the math.
- Perform expert technical work.
- Lead your team.
(1) Listen to your customers.
While it may sound like simple advice, business today changes rapidly. Keeping the pulse of your customers, with their use of faster communication, is harder than it used to be. Process changes that impact how business is conducted are critically important to your profit margins. We recommend surveying your customers frequently to ensure you understand their perspectives and make adjustments to improve your performance in their eyes.
It's surprising how many leaders somehow forget this important step.
(2) Look to create value.
Increasing your value in the eyes of your customer may involve how you deliver and serve them, beyond the technical aspects of your produce or service.
Is there something you can do to help them be more successful that's in your wheelhouse? Would it create additional revenue for them? And would it increase YOUR value, your sales revenue or the volume of business you do with them? Is it a new product/service you could offer to gain more revenue?
(3) Do the math.
Are you developing realistic forecasts of your revenue, expenses and cash flow? This is the first step to understanding your current state, which can then be followed by "what if?" models. When you've gathered your numbers, you can ask questions like:
- What if we offered more products or services?
- What if we expanded our coverage?
- What if we dropped a service or product line?
- What if we focused differently?
- What if we enhanced our sales department?
Asking questions and modeling the "what ifs," prior to a strong execution of the model, can have a tremendous impact on your profit margins.
(4) Perform expert technical work.
Really be good at your technical work! All the forecasting and planning will only do so much to deliver increased profit. You must deliver on your promise to your customers technically as well.
Invest in your team and continually help them enhance their skills in delivery for your customers. Are you getting great testimonials and referrals? If not, your work needs to be analyzed for needed improvements to ensure you're all working together to deliver great results.
(5) Lead your team.
It's good to share your vision and inspire your team members to follow your lead. Part of the vision is the desired levels of revenue and performance required by your customers.
Don't hesitate to try new ways to enhance your company's offerings, measure your results and adjust.
If you'd like to learn and discuss more about ways to improve your profit margin, just contact us.