As 2016 is coming to an end, many people begin to think about resolutions for the new year. It’s also the time when a lot of companies are thinking about ways to increase profits in 2017. Whether you’re the small business owner, an executive for a larger corporation, an emerging leader, middle-management, or anyone else in the company… the chances are good that you’ll be asked to help contribute to the success of the business.
If improving your company’s financial performance in 2017 is an important resolution for the new year, then read on!
In this article, I ask a series of questions for you to consider. These questions are centered on some of the most basic (and most significant) profit-drivers for a business. Specifically, the questions will be in the areas of:
- Increased Pricing
- Increasing Sales
- Reducing Costs
- Increasing Efficiencies
In answering these questions, it’s likely that you’ll get several ideas on how you can grow your profitability in 2017. Remember, growing profits does not necessarily mean you have to work harder. Sometimes, we just have to work smarter.
Here are the powerful questions in each of those areas for you to think about:
1. Increased Pricing
- When was the last time you made increases to your pricing?
- The last time you increased pricing, how did it affect your business? Did you lose any customers because of it?
- What is your company’s net profit margin? If you increased your pricing slightly (by 2 – 5%), what would happen to your net profit margin?
- Are you doing a lot of discounting? If you are discounting, do you think it’s helping your bottom line (by increasing sales) or is there a chance you’re just giving money away?
- Do your salespeople sell on price, or are they clearly articulating the value of your product/service to your customers and earning business through increased quality and/or increased service rather than commoditizing your product/ service?
- As your own costs of doing business have risen, what have you done with your own pricing to be able to maintain your margin (or improve it)?
- Is it time to consider raising some or all of your pricing?
2. Increasing Sales
- Are your salespeople earning new business, or have they settled into just being “order takers?”
- Do you have an effective Selling System, or “Sales Model,” or are your salespeople flying by the seat of their pants?
- Are you actively courting a list of “Top-10” prospective customers (or clients), or are you ignoring the larger prospective accounts that could make a big difference in your sales revenue?
- Do you have systems in place to follow-up with lost customers to earn back their business?
- Are your salespeople digging deep to determine what other products/services you could offer to your existing customers?
- Are you earning a favorable return-on-investment from your marketing efforts? Do you know how to measure it?
- Is your marketing message fresh and relevant, or are you just using the same text you’ve always used?
- Is organic sales growth your best strategy moving ahead, or is it time to consider the pros and cons of buying a competitor to gain market-share? Is it time to consider a partnership or other venture?
3. Reducing Costs
- “Labor costs” are always significant. Are you fielding a team of superstars, or do you have some people that are probably not a great fit for your team?
- Are you currently overstaffed? Sometimes, companies have people on their teams who aren’t able to fulfill their entire job duties, so they hire additional people to shore up those weaknesses. That results in bloated payroll. Are you currently employing extra people to make up for the weaknesses of people on your team?
- What would happen to your profitability if you were to invite a poor-performing employee to find another line of work where he/she may be more successful?
- Are you competitively bidding the products/services that you purchase on a regular basis, or are you being blindly loyal to vendors you’ve used for years?
- What is the least profitable product or service your company offers? Is there anything you can do about that? (Conversely, “What is the most profitable product or service your company offers? Is there any way you can sell more of it?)
- Where do you have expensive waste? What systems can you put in place to greatly reduce or eliminate that waste?
- Look at every expense line on your income statement, then ask yourself, “How can we reduce these expenses?”
- Do you have any unprofitable customers? What could/should you do about that?
- What services are you currently outsourcing a lot of that may make sense to bring in-house?
- What services are you currently doing in-house that may make sense to outsource instead?
- How is your employee retention? How much is employee turnover costing you? What can you do about that? (Better interviewing systems including reference checks, better training programs and mentoring for new-hires, providing cross-training opportunities and opportunities for professional advancement, etc.)
- Is there a less-expensive way for you to finance your debt?
- Are there any legal strategies you can put in place to reduce your tax liabilities? You may want to have an accountant who is not your primary accountant take a look at what you’ve been doing. A second set of eyes may pick up on something your primary accountant has overlooked.
4. Increasing Efficiencies
- Do you have recurring errors in your business? If so, how can you improve your training or your systems to make sure those costly mistakes get eliminated?
- Could technology updates (or new technology) help increase efficiencies?
- How could you streamline your company operations (in every department) to reduce wasted time, materials, and effort?
- How could you improve your planning in order to maximize your efficiencies?
- How can you eliminate mistakes?
- How can you improve communication between the different departments in your company to make sure everyone is working together and helping reduce wasted time? Would updated systems help to do that?
- Does your company have formal training programs for new hires and continued learning opportunities and cross-training for existing team members?
And now, the most powerful questions of all...
“What are the profit-killers in your business that you know you should fix, but haven’t had the time to address?”
“What are you going to do about it NOW?!”
This article was not intended to be a comprehensive list. It was just intended to get you thinking, and spark a few ideas to help you take action and make 2017 your company’s most profitable year yet.
-Rob Pietsch, Certified Professional Business Coach
Bullish About Business, LLC