How to Increase Your Profits in a Downturn
Businesses exist to make profits. Every business needs profits to expand, to enter new markets, or in these uncertain times, just to survive. So what are your strategies for increasing your profits?
When you simplify it, there are just 3 ways to increase profits:
A. Increase Prices
In tough economic times, increasing your prices might not appear to be an option. However, remember that any profits from a price increase would flow straight through to your bottom line.
The same happens when you give discounts - but in reverse. With regard to your pricing, consider the following:
Reward your best customers by offering volume discounts, as needed, to gain more of their business.
Limit extras included for free - unless you really think these would have a positive impact on your bottom line.
B. Increase Sales Volume
This is probably what most businesses continually focus on. Sales volume is important, but it's vital not to chase every sale. Focus on profitable sales volume in order to make the highest and best use of your business resources.
C. Reduce Costs
By costs, I am referring to, a) Cost of Goods Sold (COGS) or the costs directly related to providing your products and services and, b) Operating Expenses or expenses related to supporting the company such as office supplies.
Control Direct Labor
Controlling your direct labor costs is critical to every business. Monitor every employee's billable hours and cut labor costs, as needed, based on your sales volume.
Whether it's better management of direct labor or turning off lights when not needed by using sensory controls, there are many ways to reduce waste, and at the same time, help the environment.
Zero Based Budgeting
With this approach, you start with a blank piece of paper to assemble the budget. Focus on sales first, then your COGS and then operating expenses.
CEO Advisor, Inc. has the experienced advisors to help you increase your profits in this new economy. Contact
Mark Hartsell, MBA, at MHartsell@CEOAdvisor.com
for a free consultation.
|Words of Wisdom
"There's no business like KNOW Business - KNOW your industry, company, product, service, customer, and competition better than anyone else!"
~ Harry K. Jones, AchieveMax, Inc.
Member of Accredited Organizations:
Visit us at
Call (949) 759-8676 in CA or
(301) 580-8071 in the DC Metro Area
At CEO Advisor, Inc., our mission is to provide CEOs and business owners of small to mid-size companies the needed focus and expertise, coupled with hands-on advice to grow your business.
With 30 years of business experience from corporate America to funding, growing and selling a software company to a large NASDAQ company, I have the experience to drive your company forward. I have a Masters Degree in Business (MBA) from Loyola University and a certification in Mergers and Acquisitions from The Wharton School - University of Pennsylvania.
Mark Hartsell, MBA
7 Keys to Business Success
Everyone is focused on the deluge of bad news and pessimistic forecasts. Credit is tight, the stock market continues to behave like a yo-yo and both business and consumer confidence are struggling to recover. Some forecasters are saying the economy will rally in late 2009. In many ways these are opportunistic times so use your time as your most valuable resource.
The key for CEOs and business owners is to stay focused on your strategy for increased growth and profits.
1 - Focus, Plan and Forecast
Remember that we have always had to deal with uncertainty when developing plans and strategies. It's probably true that there is more uncertainty this year than in previous years. The best way to deal with uncertainty is to build flexibility into our plans and strategies. Instead of predicting one outcome, forecast the best, worst, and most likely scenarios and be ready to deal with all of them. Developing strategies and plans are the easy part - implementing them is much more challenging.
2 - Execute
Make sure that you actually implement your strategies. According to a recent Ernst & Young survey, an amazing 66% of corporate strategy is never executed. But implementation is just as poorly handled in owner managed companies. There are, however, a number of reasons why strategy implementation fails and the remaining tips will help you avoid them.
3 - Action Plans
Develop written Action Plans for execution. Begin by asking your key people in what way the company will be different after the strategy has been executed. Compare the future with the current situation and the need for changes will appear. Then ask the team specifically what has to be done to make the needed changes. The answers to those questions will form the basis of the Action Plans.
4 - Reality Check
Avoid attempting too much. Firstly, we want to stay flexible enough to respond to whatever happens and be able to switch from the strategy we chose to others. Secondly, there may be a long list of things to be done to make the needed changes. Very few companies have the resources to address them all at once. So, prioritize the things which have the most impact on success and profits.
5 - Resources
Commit enough resources to completing the priorities. All business owners are inclined to tackle too much at once and to try to do everything in the minimum amount of time, while spending as little money and involving as few people as possible. However, think about the priorities this way. We've invested a significant amount of time identifying the best opportunities for the company in 2009 and figuring out the most important priorities. All of that effort will be wasted unless we commit the resources required to complete those actions successfully.
6 - Stay on Track
Follow up regularly and in a structured way. There are at least 2 good reasons for doing this. Remember the point about uncertainty? That being the case, we have to compare what we thought would happen with what has happened and make any necessary adjustments. Secondly, what could be more important than ensuring we successfully complete the actions that will lead to the execution of our business strategies?
7 - Accountability
Results occur when there is accountability. Create a schedule with assigned personnel for each task to ensure success in achieving your goals for 2009.
Bringing in a trusted advisor for 3 to 12 months can make a tremendous difference in setting and achieving your goals, getting hands-on help and gaining the senior level camaraderie you need to make your business the fulfilling venture you envisioned.
CEO Advisor, Inc. provides CEO advisory services, including business and strategic planning, operational efficiencies, sales planning and team building, marketing planning and implementation, mergers and acquisitions and other services to CEOs and owners of small and mid-size companies. Contact Mark Hartsell, MBA, at MHartsell@CEOAdvisor.com today for a free consultation.
"Over a one year period, Mark helped me to understand what my role entailed. Together, we segmented my numerous headaches into achievable goals. I learned to focus on specific issues and predict obstacles by looking at my business quite differently. Mark taught me how to understand financial reports as well as the implication of spending. I now understand how to measure the performance of my company and profitably grow my business."
CEO, Web Service Company