3 Things to Know That Will Increase Your Profit: Part 3
Welcome back to Part 3 of the “Increase Your Profit” Series. In Part I we focused on your mission. Part II looked at your customers and today, let’s focus on what to know about your numbers.
If you don’t know your financials inside and out, you are driving a car forwards while looking out the back window. You don’t notice things until they already pass by. You can:
• see that there is money in the bank account,
• that you have sales, and
• that expenses occur.
You just have no idea why it is all happening or any ability to anticipate it happening again. You are running a company on instinct and a gut feeling.
While there is a place for this, instinct coupled with real data is much safer. You may make it down the road with only a few scratches and dents, but eventually, inevitably, you will hit something big and the game is over.
Example: Do you know how much each client costs you in marketing dollars? Do you know how long you would last if sales dropped 50%? What would be the plan if sales increased by 100%? What return do you need in order to hire a new employee? How can you justify the position with real dollars?
Financials and all of the reports that can go with them are not just tools to report what has happened, they are the basis for projecting into the future. They give a business the ability to anticipate and prepare versus report and react. The business starts making things happen rather than being a victim of circumstance and market.
Years ago when I was with David Weekley Homes (a large national home builder), I remember sitting in a meeting and having the leaders of the company tell us about a plan to reduce expenses and prepare for the worst.
The interesting thing was that it was during one of the biggest booms we had seen in the industry. No one told us that the sky was falling the next day, but we knew it was coming at some point so we started getting ready. When the bottom did drop a few years later, we were prepared. It was painful and people lost jobs, but the majority of the employees and the company survived due to the preparation.
Do you have a plan?
What To Do Now:
• Do a thorough financial review.
• Get standards for coding and reporting that everyone conforms to so that information becomes more accurate.
• Chart key areas and share with your team so that everyone knows where to focus and can see the improvement as it happens.
Knowing these 3 things (your mission, your customer & your numbers) will allow your business to continue to build a solid foundation to grow. They are the basis for many other decisions and directions.
They will open doors to new customers, new products and services, and new capital sources.
They will also reduce stress, make decisions easier and build a company of like-minded individuals all pulling in the same direction.
What would you do if you had more time, enjoyed your job more and made more money? That would be the next thing to know after you answer these first three…