Business owners and executives have long sought ways to improve their bottom line. Usually their energy is focused on how they can attract more customers to generate additional sales. However, working strategically is the key to immediately boosting the bottom line. Business strategy is not only about how to be more profitable tomorrow but also how to immediately march more dollars into your business and onto your balance sheet! These tactics will help your business grow in any kind of economic climate, recessionary or otherwise.
Here are 3 Strategies to improve your bottom line today:
- Implement or Upgrade Your Systems and Processes.
Systems and procedures are put in place to keep companies on course toward their profitability goals and to minimize surprises along the way. They provide a clear and consistent blueprint for how business is done on a daily basis and how decisions are made. Inefficient systems and processes are costly in terms of dollars, waste, rework, delays, resource utilization, whereas ineffective ones are pricey as well because they are not reliable. They don’t do what they are supposed to do.
The first step is to go back to the fundamentals: ‘why’, ‘what’, ‘who’, ‘where’, ‘when’ and ‘how’ questions. The first question about any process/action is, why do it at all? Often many steps exist simply because of the status quo: ‘We have always done it that way’. The second question might be, why do we do it this way? Then, what is being done? What should be done? What can be done? When should it happen? And so forth.
The second step is to not only look at the actions required but also at the sequence in which they are carried out: a process can be inefficient and ineffective because the steps of the process are completed serially instead of simultaneously.
These two steps apply to all processes, reporting, positions, types of organizations and all industries.
- Get Your Pricing Right
Pricing mistakes drive a lot of entrepreneurs out of business. Since the goal of your business is to thrive and prosper, you must capture your market avoiding however a price-race to the bottom.
To get your pricing right, you must:
- Understand your value add – Customers’ buying decisions are not always rational. Pricing is often about the emotion triggered by their perception of your value proposition. It will be commiserate to the extent of the problem you are solving for them and not to your mechanism of delivery i.e. hours spent, expertise, materials, etc.
- Know your target market – Pricing is not based on personal financial goals but on what price point your market can bear. This will require some market data research. A great way to start is to look at your competition. Unless you have acquired 100% of the market shares, you do have competition: any customers that are not buying from you right now are spending their dollars on another solution.
- Calculate your actual cost – Be sure to include materials, labor, federal and state tax payments, and company overhead in your actual cost. If you don’t know how to accurately calculate your actual cost, contract a controller or CFO. These few dollars spent will be worth it as pricing can make or break your business (see Financial Management).
- Measure, measure, measure!
Management can’t comprehend the extent to which their organizations and processes are efficient and effective unless they choose and use the right metrics. Growing a business requires the skills and discipline to collect and analyze the relevant business data. Metrics may vary depending on your business but the following categories are common to all businesses:
- Financial metrics – They include sales revenue, cash flow, accounts payable, accounts receivable, direct costs, operating margin, and net profit.
- Operational metrics – They measure your staff productivity, your productivity ratios, manufacturing ratios but also the integration of your company culture and employee engagement.
- Customer metrics – They track customer acquisition costs, customer loyalty and retention
There are only 24 hours in a day and there are always excuses that can be made, but those who are truly successful have invested into developing proper strategies, to increase profits right now sustainable through tomorrow and beyond.
Author: Carine Dieudé, Partner, Director of Strategy, former corporate strategist, specializes in growth strategies, systems and operations, for small and medium size businesses.
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