How to Increase Your Business Profits

Many business executives feel that today’s economic environment is not conducive to increasing business profits. Of course that would be the organizations not doing so well, but there are in fact many organizations that indeed are making good profits today. Those that are making good profits are probably using a strategic cost management System.

To better understand how you can increase your profits an organization’s executives need to understand only one thing, “Costs are the most controllable part of the profit equation.” This of course sounds too simple but it is often overlooked. To take it a step further you have to dig a little deeper to truly understand what your ‘direct and indirect costs’ are so you can control them and increase your business profits.

Slash and Burn Equals Profits

Slash and burn might have been the way to maintain profits in the old days, but today’s economics and accounting have matured and offer much more effective ways to maintain your organizations economic profitability. Cost management used to be about locating where an organization’s most expensive costs were and trimming that function back. In fact it was the ‘old ways’ that helped bring about the economic shortfall we have seen in recent years. The smart way to increase business profits and manage costs is with Strategic Cost Management.

Strategic Cost Management Equals Profits

What in the world is Strategic Cost Management? It’s the process of integrating and aligning cost management within the organization’s strategic plan in order to ensure that cost management is part of a company’s operating procedures. A strategic cost management plan should be developed so that it will mirror the company’s life cycle as defined by the company’s services/products, markets, human resources and technologies. It’s a cost management plan that ensures your organization can maintain and sustain its economic profitability in any kind of market or economy.

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Turnaround Strategies for Troubled Businesses

Troubled businesses often look doomed to either fail or get bought up by successful competitors, but turnaround strategies can help a business return to a more profitable and stable position. Implementing business turnaround strategies requires making a number of painful decisions, but you need to remain focused on the fact that the decisions represent a path to rebuilding a viable business.The following are a few frequently utilized methods of a business turnaround.

Downsize

Troubled businesses often keep employees on the payroll that the business does not actually need or that no longer serve a function. Cutting down on the number of employees you must pay every two weeks can create a major cost savings. You can also consider pay cuts or reduced hours for all employees as an alternative to straight layoffs. No matter what strategy you choose, you will meet with resistance and, likely, anger from employees. Provide employees a straightforward explanation of the financial situation and that the business must cut back on staff and wages or close its doors.

Drop Deadbeat Customers

Many businesses must cope with customers that place big orders, but ignore invoices. Make it a priority to collect on any outstanding invoices from these customers to help shore up the business’s finances. Once you collect on these past due accounts, advise the customers that they need to find a new service or inventory provider. Dropping deadbeat customers lets you devote precious resources to paying customers and new customer acquisition.

Drop Non-Critical Projects

Even small businesses tend to accumulate ongoing projects that suck up employee time and capital. Conduct a review of all ongoing projects and drop any projects that are not business-critical. Dropping projects lets you devote that money and employee time to operations or critical projects.

Cut Expenses

How to turn around a small business that is failing

Starting a small business can be an exciting thing. Unlimited money making potential and the ability to be your own boss and set your own hours drives many people to start small businesses every day.

However, many people don't realize the amount of knowledge and work it takes to start a small business, or they fail to properly research their market before they start the business. As a result, almost half of all small businesses fail within the first few years

If you feel like your business is failing, don't lose hope. There are a number of things you can do to bring it back. The following are a few suggestions for helping to turn around a small business that is failing.

Reevaluate your products or services.

The first thing you will want to do is take inventory of your produces and services. From there, determine which ones are the most profitable and which ones are costing more money to produce than you are making from sales.

In doing this, you may find that your most profitable services or products have nothing to do with your core business idea, or they are not your flagship product. For example, let's say you have a skincare business that sells mainly lotions and creams, which you market the most. But you also sell a few hair care items as well and you find that your hair care products are outselling your skincare products by a long shot. In a case such as this, you would be better off marketing and producing more hair care products and eliminating some skincare items.

Consider market research.

One thing you may want to do is conduct some market research. Market research collects and analyzes various information about your target market, potential customers, and your competition, among other things. 

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Five steps to achieving a business turnaround

Why do businesses fail? Excess leverage, management shortcomings, technology changes, loss of market share, an ineffective board of directors and overall economic conditions are some of the leading causes of business failure today.

A lost contract coupled with product distribution problems may initiate a downturn. For business owners, it may seem easy to overlook difficulties at first. However, if an organization does not immediately address looming problems, it will hemorrhage key employees, cash and customers. Revenue sources will dry up, and the once rosy future becomes dim. An overall sense of fear, panic and despondency sets in.

Smart business owners seek ways to maximize the profitable good times as well as strategic guidance and expertise to curtail and remedy potentially lean periods. Surprisingly, though, many owners do not ever expect their organizations to perform below average or worse. They do not plan for fallow periods or even periods of distress. Like an ostrich, management may bury its head in the sand, not wanting to know the extent of the difficulties. The wake-up call usually comes when a company hits a cash crisis and owners are required to call on its bank or investors, and panic is set into motion.

Management’s initial reaction to crisis often gives an indication of the longevity of their organization. Those leaders who seek council early tend to prosper in the future. Further, these owners realize the importance of keeping clear and open channels of communication with all stakeholders by providing key information on a timely basis.

Alternatively, some companies see, but ignore, the warning signs. These firms often decline, and then fail without implementing decisive recovery measures.

What many organizations do not realize is how quickly the business lifecycle can shift. Company owners may be too close to the situation to see what’s really going on in their business, or so exasperated that they’re ready to give up. 

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Why do you need a consultant for your business?

While business people typically have a broad range of skills, with perhaps some specialties; changes within the business, in the broader economic climate, or other unforeseen circumstances, can create a need that can't be met with the existing skills within the business. When that occurs, employing a specialist consultant can provide the skills necessary to deal with the situation as well as an objective viewpoint that can help to effectively focus the team.

What could a consultant do for you?

There are nine main things:

    1.Provide information

    2.Solve problems / issues / challenges

    3.Realise latent opportunities

    4.Diagnose, and redefine problems / issues / challenges &                opportunities

    5.Recommend

    6.Implement

    7.Build consensus and commitment around corrective action

    8.Facilitate client learning

    9.Permanently improve organisational effectiveness.

And the last three, are the mark of the ‘better’ and more effective consultant.
 

Why does an organisation engage a consultant?

These are the 12 most common needs for consulting help:

    01.Temporary assistance

    02.Objective review

    03.Third-party request for problem / opportunity identification & resolution / realisation

    04.Surviving a crisis

    05.Initiating change

    06.Obtaining funding

    07.Selecting key personnel

    08.In-house education

    09.Conflict resolution

    10.Executive assistance

    11.Government regulatory assistance

    12.Socio-economic and political change.

And of these each needs, can be broken down into six parts:

• We must have specific skills
• We require knowledge
• We demand experience
• We will set a timeframe
• It’s necessary for the consultant to have frequently addressed our needs
• Objectivity is a necessity.

What’s the role of the consultant?

Having defined a need for consulting help, we then consider the consultant’s role in addressing these needs, and there are five:

    1.Coach

    2.Expert

    3.Facilitator

    4.Mentor

    5.Trainer.

In practice, the consultant’s project role is typically a combination of #2 (the Expert in the room) plus one of the others.

What type of consultant might we want?