Interestingly, the common pattern of growing companies is marked by sales increase, staff increase, and profits decrease. With the business growing and forming itself, the entrepreneur most often gets involved in urgent daily tasks which take precedence over quality strategic thinking and planning.
Entrepreneurs often instinctively know when a product is not as ‘profitable’ as was planned; however, they are often deluded in thinking that a sales increase will solve the profitability problem. True, in many cases this is possible, but not always, and not in a satisfactory way. The key lies in the good planning of profit improvement and the ability to fulfil that plan!
Critical points that must be included in the process are:
data regarding clients, products, turnover, which are rearranged until a clear overview of market position is achieved,
data regarding return on investment and cost of product development,
relationships with key suppliers and customers,
possibility of correcting prices,
eligibility for incentives or co-financing,
development of a system of rewarding employees in order to increase productivity,
analysis of the market, competition, and customer needs,
analysis of cost reduction in various areas,
possibility for better management of foreign exchange and funds,
alternative sales channels, if there are any?
organizational structure, can it be more fitting to business needs?
business sites, do they support business operations adequately?
Improving the profitability of the company should be seen as a continuous project. A certain amount of time is necessary to invest in its preparation and implementation, and then one must continue to monitor it closely and always anew analyze the possibilities of increasing profitability. Business owners often instinctively know when a product is not as ‘profitable’ as was planned; however, they are often deluded in thinking that a sales increase will solve the profitability problem.
Do not forget that the purpose of running a business is to make profit, and profitability is the measure of your efficiency. Be efficient. A finance director can help you with that!