Every day in every way business owners seek to increase business profits, with little or no costs and low effort. Well, I have been running an SME in IT (a highly turnover business area) for 35 years. Because of my skills and experience in IT, I am regularly called to meet with other business owners to discuss ideas and ways to increase their profits. So, I thought I would share my experience.
Step 1. Don’t Close your eyes.
Sounds simple. But people close their eyes in every way. If you look around critically at businesses, you will see that many people are happy just to go to work, and not question, not look, not review, not critically assess their own business. I myself did this for some time, whilst I was raising a young son. In the end, I had to open my eyes or my company would not have survived and continue to grow today.
So how do you know if you are closing your eyes? Answer these questions
- What is my competition doing?
- What are they charging?
- How effective are they (e.g. delivery, customer base etc. compared to me)?
- What is my industry doing internationally?
If you are guessing or don’t know the answers to these questions – then your eyes are closed. If you know some of them, then consider this advance warning, You should know the answers to these questions in order to increase business profits.
Only last week, I had some clothing embroidered for my company but no confirmation of the order was received until I phoned and left a message 1 week after the order was sent in. Finally, a person called back, after leaving a phone message, and they said: “oh, I’m not sure”. I said the date, time and address I emailed it to, and they said they would check. Then I was told: “oh, I think we have to wait for supplies for this”.
Another week + goes by, still no response, and I emailed a fellow manager and asked him to follow up – the whole of treatment, the lack of response, the time past, the lack of the requested confirmed price all indicated that this company was having difficulties and may not be in business for much longer, and I indicated this in my email to my colleague, stating “I think …..” I also cc’d the business in.
Well this time, I received a very angry call from the business owner. When I explained my reasoning, he was still so offended. The end result, after that call, he did my work that day and sent it out. I needed new embroidery again within 2 days of this. Do you think I went back to him? No. For the same price, I went to Vistaprint, who emailed me a thank you for the order, gave me an expected delivery date, then went to deliver this product to me earlier than expected. The price was about the same. So this man, who in our phone call, said sending an email to confirm he received my order was too hard – has lost business – why, because his competitor is doing this and his competitor is easier to deal with. He will only continue to lose business.
Step 2. Can I reduce my costs, or get better value for my costs.
Can technology reduce manual workloads?
Every day, I write code, that reduces manual work. It rarely decreases jobs, but it does increase what the business offers and in turn, their income improves. Sometimes, however, it does reduce employment.
So many parts of the business can be automated or business work shared which may be between colleagues or even outsourcing.
How else can you reduce your costs, and not reduce what you offer or do?
Step 3. Do you need to Buy, or is renting better?
In the past, we purchased everything. Cars, Houses, etc. Today, with such a fast moving world, businesses have recognised that Rental may be better. As what you need today for the next 12 months, may not suit in 12 months time. This idea has been so accepted by Software, that renting software products is the “norm”.
Step 4. Do your weeding or increase sales?
Many years ago, I realised that 15% of my customers gave me 90% of my income. I also worked out that 10% of my clients (by the way they were not in the 15%) took 80% of our time. So I decided to weed before seeking new business. In fact, during my weeding, new business just kept coming.
I slowly but surely got rid of 85% of my customers, added new customers along the way and increased my profits and developed long-term strategies to survive because I was not on the hamster wheel. I have been able to develop new products, such as www.crm-map.com and have managed to have a balanced life.
My only regret. Knowing about weeding, after being in business for 25 years. If I knew this 25 years earlier, I am sure, I would be in a different place today.
The fact is that by clearing 80% of my time on less than 10% of my income, allowed me to find another 15%’er clients that would be good long-term clients. These clients we have and we certainly take care of them.
I am now in a position to grow my product and sales base.
Step 5. When to change?
Change is inevitable for all businesses. So if you wish to increase business profits, choosing when to change and what change to make is vital. It does not matter if you paint walls, or write code, change in business is now a fact of life. So making the right change at the right time is vital. You need to research, investigate, try and finally, trust yourself to make the right choice. Then select your timing.
Step 6. Have a Living Business plan, with a living budget and living action plan.
Do you have a living budget, and living business plan? I mean living as one that you review and update on at least a monthly basis. Without plans, one is drifting along without direction, timelines, goals etc. These are vital if we are going to increase profits. But having one and putting it in the drawer is useless.
Plans need to be real, researched, reviewed and altered if necessary. Think about all the major achievements in your life which have been planned and worked on daily, E.g. School, University, purchasing your first car, purchasing a home etc. Planning with research and commitment to achieving that goal is what will bring you extra profits.
So…. What now?
Well, if you have seen areas that you need to alter, you need to commit to alter them and act on that commitment. If you are unsure, meet for a coffee with a mentor.