Every manager, and particularly an owner operator, is interested in increasing the profitability of the business units they manage. 12Faces has distilled a wide range of advice and methods to enable you to do this and has grouped them into a Course we call Optimise100. We present a series of activities so that you can realistically hope to optimise your existing business, and in turn, double your Profits within 100 days. This part of the Program discusses getting ready to launch your Optimise100 Program.
Introduction to Increasing Profitability
There is no science to how you can improve your profits or turn around a lagging or troubled business but the group of techniques that have been collected in this Menu will give you some insight into opportunities to dramatically improve your Profit.
This article will focus on optimising your current business operation. It is not aiming to necessarily increase your revenue but to streamline what you have and thereby direct more money to bottom-line profit. Because that is simpler than increasing revenue, it can happen much faster. It’s a good idea anyway because it would be wasteful to first focus on revenue increase if the business was not as efficient as possible already. That would mean missing out on maximising the profit from the increased revenue.
Doubling your Profit sounds like a very formidable task but even something as simple as increasing your prices by 1% can easily lead to an average of 11% increase in profit according to a study of 1,200 businesses. Similarly, careful application of the 80/20 Principle and the Theory of Constraints can have quite dramatic impacts on profit.
We have arranged the items in this Menu in the order that we feel flows the best. You can of course change the order in which you apply these tasks to suit your circumstances but quite often a method of improvement is ideally preceded by some earlier step. We encourage you to think about following this process before consciously deciding not to.
This article is about quick ways to increase the Profitability of your existing business. In another article, Grow365, we discuss how you can continue to grow your Profit by growing your Sales Revenue using your soon-to-be lean, Profit maximising, business model.
To use a medical analogy, Optimise100 is the equivalent of triage. When a critical patient is first admitted to hospital, staff stabilise them and make the best of what they already have to work with. This is triage. Next, the staff work to get the patient onto a path back to full health and well-being. Our next Program, Grow365 is our equivalent to getting your business as healthy as it can be.
No surprise, Double your Profit means just that. But when you combine it with our Grow365 article, your Profit can grow 400%! But wait, there’s more. Many of your overhead expenses like office space, marketing and IT will not need to double to double your profit and revenue. For the sake of a demonstration, let’s assume your fixed costs remain the same. Your profit increase is no longer 400%; it becomes 600%!
Worth investing some time and effort to get these sorts of profit gains?
Perhaps the easiest way to systematically take advantage of the Optimise100 Campaign is to first arrange to access the Spreadsheet available with the course materials.
You can read more about how to obtain and to use this spreadsheet here.
Steps for Getting Ready to Increase Profitability:
Work through the following articles prior to embarking on the next project – A2.3 Cost Reduction:
Review Your Strategic Planning
Congratulations on completing the above steps for “Getting Ready”.
If you already had a Strategic Plan, Goals and Objectives, Mission Statements and Key Performance Indicators (KPI). Well done you!
Because you are optimising your business, review these existing documents to be sure they still reflect where you want to go. If they do not, they should be overhauled before starting the optimisation process.
We don’t want to optimise for the wrong things!
Optimise100 is divided into several projects to be more accessible for you. These are:
- C2.2 Introduction
- C2.3 Getting Ready – how to prepare (you are here now)
- C2.4 Cost Reduction – the fastest step so probably where you will start
- C2.5 Increase Revenue – without making many changes to what you presently have, it is likely you can increase revenue. Options are discussed here.
- C2.6 Advanced Profit Growth Techniques – Blue Belt
- C2.7 Using the Optimise100 Planning Spreadsheet: this is a worksheet for all the things you might work on and their expected payoffs, pick the best first.
We are flexible with how you sequence the activities in Optimise100. But, it is usually easier to reduce Costs than it is to increase Revenue.
Therefore, we suggest you go to C2.4 Optimise100-Cost Reduction next.