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Boost Profits During Hard Times Through Rational, Cohesive Action
By Bob Prosen
If you’re waiting for the current slow market to get better, you’re wasting a golden opportunity to beef up your small business profit strategies through aggressive change management while you have the time.
What do you think your competitors are doing right now?
If they’re smart — and I’ll bet they are — they’re using this time to fine-tune their operations and prepare for the future, not just waiting for it to happen.
You may think you can’t increase profitability in a slow economy, but I’m here to tell you that you can, and you must.
Now, you’ll have to make a real commitment to change if you want to be a front runner when things get better again — and they will get better — but you need to base your planning on a realistic view of your market.
In this post, I’m going to outline EXACTLY what your small business needs to do to increase profits, regardless of what’s going on with the economy.
How to Maintain Quality and Grow Sales Without Sacrificing Profitability
• Errors, rework, inefficient procedures and ineffective use of technology
• Intense pressure on prices
• Increased competition
• Extended receivables and write-offs
• Maintaining high quality with razor thin margins
Everybody’s struggling with profitability as the nation works hard to recover. The result is a fiercely competitive market. Sacrifices have to be made, but be careful not to make the wrong ones. Realize that profitability is possible, even now, but it requires courageous change management to make tough internal changes.
Ways to Increase Margins
When markets turn, you can’t keep doing things the way you always have. This is where your commitment to change is vital to your profitability strategy. In fact, the most successful companies change before they are forced to.
Solutions to increasing margins and profitability can be simple or complex, but the hardest thing to change is your old company mindset. You’re going to have to peel away petrified layers and calcified attitudes, get back to basics, and adapt to reality.
Here are some ways to start making that happen:
• Simplify your objectives: Focus on crucial goals and objectives. Once you know your priorities, make certain every employee knows the plan, understands his/her role, and feels like part of the company’s success.
• Diversify: Rediscover how you originally established your company in your field. Now do things that way again, only in new and innovative directions! A fresh industry or product / service base will give you more opportunities for growth and profitability.
• Assess the competition: Everybody is competing for the same limited opportunities, and some are slashing prices in a panic. Look hard at your competition, figure out where they have an edge, then implement strategies to neutralize their strengths and amplify how your solutions better meet customer needs. Don’t talk negatively about the competition. Instead create doubt by arming prospective customers with targeted questions to ask the competition.
• Win/loss reviews: Create tracking systems to monitor the specific reasons why your company won or lost each engagement. You will quickly see the top reasons for each outcome. Stop doing things that cause you to lose, and replicate the wins.
• Increase scope: Train your managers to spot fresh opportunities while working with clients. Teach them how to ask the right questions and when to involve other team members.
• Closely review all time reporting information: Understand what drives costs through time and activity reporting, which will provide the measurements and information you need.
• Implement a simple tracking process to capture the volume of repetitive problems such as rework, customer complaints, product problems, etc. Identify the biggest offenders and implement a process to uncover the root causes. Implement changes that will eliminate the root cause and prevent the same problems from recurring.
• Eliminate excuses: There is simply no place for excuses. Reward results and maintain accountability for failures. It’s the leader’s job to be hard on performance and easy on people.
• Get insightful client testimonials: Testimonials are highly effective in convincing potential clients to choose your company. Testimonials should directly address the top three objections you hear from prospective customers. Ask clients to give you testimonials you can use to help win work, and get them on video if possible.
• Remain vigilant on collections: Don’t be a bank for your clients. No payments due should be allowed to age beyond 90 days. Contract terms need to be specific and firm, and whenever possible include milestone billing and partial prepayment to maintain positive cash flow. Be flexible when you can, but don’t let your clients take advantage of your company.
• Reevaluate your message: Make sure your marketing message is hitting the mark and saying what you want your customers to hear. Each client has a specific need, and your marketing message must speak to that need. Test your message and make sure it works!
If you intend to stay competitive right now, your small business can’t afford to continue with “business as usual.” Playing through tough times requires active change management, rational profit strategies, cohesive team effort, attention to detail and laser-focus on meeting clearly-set goals. Playing to Win requires your dedicated hands-on leadership, so you’d better be up to the task.
If you want to see where your leadership abilities stand and get help improving your skills, read my Leadership Self Assessment post. By being a true leader, and training your team to lead, you will create a company where everyone is committed to winning. That spirit guarantees accountability and follow-through on your small business profit strategies, even in these hard times.
March 26, 2012