3 Simple Steps To Release ‘Lost’ Profit From Your Business
You work hard as a business owner, so use these steps to extract more profit from it.
A client’s business was making annual sales of £640K but only paying him £18k. Using the steps below, we found simple little problems on every job were crushing their margins. The fix was simple and increased their profits eight-fold to £160k. Here’s a breakdown of the process to achieve it.
Step #1: Look For Symptoms in Your Accounts
Your accounts are clues to what’s going on inside your business. Become a detective, using these clues to detect the crime.
- Poor overall sales point to your business not doing enough
- Poor profit margins say you’re not making enough per sale
- Inflated business expenses — your business spends too much
Step #2: Identify The Facts
To understand what’s beneath the numbers, follow the clues…
- Why have sales fallen?
- What’s the cause of poor margins? Prices, costs or problems?
- What makes up the 80% of your expenses? Staff? Rent? Borrowing?
With the facts in hand, dig to the next level…
Step #3: Prosecute The Root Cause
Find the action or decision causing the poor profit. Hiring too many staff, poor business processes, mis-pricing etc. Be dispassionately honest with yourself.
Step #4: Apply The Simple Fix
Solve the problem in the simplest way. Keep it simple stupid, in the words of Kelly Johnson, legendary lead engineer of Lockheed’s Skunkworks division.
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