All businesses aim to be profitable and to continue to drive profit levels. There are several areas that can affect profitability that need to be controlled to ensure the business sustains profit levels. A business must analyse costs, specifically the cost to serve model; the variables must be understood and controlled to ensure profit levels remain consistent. It can also be useful to understand sales and profit per staff member and align this with payroll costs. Whilst it is important to understand which members of staff are the most profitable, it is just as crucial to understand which products ranges are most profitable. The correct management information can give you an idea of which product ranges present the biggest opportunities and in which clients the opportunities exist. Your management information should also help you identify pound note contribution and will map margin percentage.
Understanding your cost base
In competitive markets, it can be tough to win new sales. But that doesn’t have to mean that you can’t make more money for your business. Understanding and reviewing your cost base regularly is good business practice. This may include general overheads, marketing activities, transport and delivery costs and other elements of expenditure as well.
Increasing profitability through your product/customer mix
It is important to understand which of your products and services are the most profitable and to ensure that your sales focus reflects this. In addition to this, understanding the relevant market sizes and the potential of both products and customers will ensure that you have identified the correct and most attractive market opportunities. Once this is complete, you need to ask yourself, does your product offering reflect the need of the market place of which you need to sell it in. For example, do you need a ‘good, better, best’ product strategy? Or do you need specialist sales people, focussing in on specific customer types.
Once these initial two elements are understood, do you have the correct management information to enable you to measure your performance and to continually re-assess that your product and customer focus is on the largest and most profitable opportunities.
How effective is your use of technology?
There are now numerous e-commerce opportunities for any business. This may purely be in the form of lead generation but increasingly there are sales opportunities too. Having an effective strategy in this area is imperative for any business looking to grow it’s sales and identify new customers.
Customers increasingly expect fast, supply in full logistics solutions. How good is your business in this area? Are there opportunities to improve your business in this area?
PeopleDo your sales team know your most profitable products and brands?
Does your business train and recruit people with key target customers, and key target segments in mind?
All of our Consultants have successfully led and grown their own businesses. Their practical knowledge and understanding enables them to give ‘real world’ support to our clients.