In my last post I talked about the 4 ways to increase the profitability of your business. It is great for you to understand what these 4 ways are, but it is BEST if you can use these in your business.
Increasing profitability requires a well-thought-out strategy based on calculation and the development of what-if scenarios. After all, a change in one factor is going to affect other factors.
For example, what if you increased the price of your products and/or services by 20%? How will that affect your volume? If the number of sales drops, will profits increase? Only the numbers will tell.
There’s no point sitting in the driver’s seat if you don’t have a map. A profit strategy is your map, built on the unique requirements of your business. It allows you to make informed decisions as to which actions you will take in order to increase your profits.
Taking it step by step
Understanding what drives profit in your business and the 4 ways to increase profitability are the first two of nine steps to developing a successful profit strategy.
Step 3 – Evaluate your profit potential
Your next move is to quantify the amount of profit currently hiding in your business. How will changes to the four profit drivers impact your profits? How big of an increase can you realistically see this year?
Step 4 – Lay out your strategy
With analysis completed, it’s time to choose a course of action and solidify your plan. How much more money do you want to shoot for? How will you get it? Will you increase prices or try to create packages in order to increase the value of the sale? Will you work on streamlining operations? Be specific.
Step 5 – Determine changes required in the business
What else needs to get done in order to implement your profit improvement strategy? Will you need to create new marketing material? Will you have to upgrade your computers and software?
Step 6 – Take action
This is the most important step, and the one where many owners fall down. Fear, resistance, life getting in the way—those are just a few of the reasons we offer for failing to take action on a plan.
Success requires that you just do it. But don’t feel that you have to do it alone. Many people use friends, mentors, partners or coaches to keep them on track and motivated.
Step 7 – Measure results
Again, very important, and again, often skipped. How are you going to know if your actions are working? Measuring results allows you to make informed, accurate decisions based on what’s really happening in your business.
Step 8 – Evaluate and revise
Did your profit strategy work? Why or why not? Use what you learn to refine your strategy for further growth.
Step 9 – Re-measure
The process of taking action, measuring, revising and measuring again will go on as long as you’re interested in improving the profitability of your business.