Profit Maximization Strategies

Here are a couple of ideas for entrepreneurs to consider as they are growing their business: 

• Increase your financial visibility- Have you heard the old saying, “you gotta know where you are, to know where you’re going”? Same applies here. Do you have your finger on the pulse of your business and can see your full financial picture in real-time daily? If the answer is no, then you may consider that you need better financial visibility. By optimizing your financial visibility, you will be able to paint your financial future with accuracy instead of throwing a dart with the hopes of hitting the bullseye with a blindfold on. We have a client who, after three years working with us and by enhancing his financial visibility, doubled his revenue and tripled his profit. 
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• Increase your efficiency– Most of our clients say, “that’s all well and good to increase efficiency, but I have no idea how to do that or where to start”. Start by looking at your team and asking these questions, do I have the right people in the right seat? Are they optimizing their production or workload each day? Do I have too many employees or too little to produce the revenue that I envision for the business? If you are unable to emphatically answer those questions, you need to plan your capacity for your business based upon data and capacity planning. Afterall, employee costs are usually the largest expense for any business so why not maximize your return on investment. One client of our experienced a 15% spike in profit simply by positioning the right person in the right seat with task assignment which increased productivity. The client was able to predict when to hire the next person based upon scaling the business. This strategy saved excessive employee costs by planning when to hire based upon growth verses throwing employees at the problem without a plan.  
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• Diversification of services or products- Have you analyzed your service lines or product offerings lately? Do you know which ones are profitable and which ones are not? Just about everyone has heard of the 80:20 rule. That means that 80% of your revenue is from 20% of our services lines or products. Perhaps it is time for you to take a deeper dive into your revenue streams to dissect which offerings are working for you and which ones are not. Often, we find that by eliminating some customers or products from your revenue streams, you can better find the sweet spot in your business and maximize your revenue around those lines. Additionally, by analyzing your revenue streams, you can further pinpoint new “good” business that you are certain to take on that will produce the highest return for you. A client recently came to us for CFO services to increase his profitability. After a deep dive into his client base, we determined that if he eliminated the work he was producing for just 16 clients who were not profitable for him, he could focus on his 20 top growing clients who could double their revenue which out adding any additional resources. This created a $200K opportunity for the client without any extra effort.  

• Profit Plan- Does your business have a “plan for profit”? Most entrepreneurs know the word budget, which sounds dreadful to most and would rather poke their own eye out. If you say the words Profit Plan, well now, that sounds much more pleasant and positive. How are you planning for profit and are you executing against that plan? If not, consider writing a Profit Plan and sticking to it. From a 2021 study, about 60% of small businesses have a budget. Of those 60%, only 41% track their spending against their budget. Of the 41%, less than half actually make decisions and adjustments with the information. Recently, a client came to us with no visibility or a plan. We immediately created visibility for them so we could “know where they are so we can know where they are going”. By initiating a Profit Plan for the client, we were able to shift them from a loss of 2% to a gain of 11% by executing against the plan.