Articles Tagged ‘Business financing’

6 Unorthodox Strategies that Increase Your Business Profits

Thursday, September 1st, 2011

A few weeks ago I spoke to the Professional Association of Consulting Engineers on “Unorthodox Strategies to Improve Profit in Business”. It was a great group of people and they had some interesting responses to some of the questions that were discussed. But just like every other business owner, financial management isn’t their passion; engineering is. But they know that learning about how to improve financial performance in their business is critical to their long term success.

Why Unorthodox Strategies? Unorthodox means breaking with tradition or doing something that everybody else isn’t doing. 80% to 85% of small businesses (those under $20 million in revenue) don’t utilize these strategies on a regular and/or consistent basis.

Unorthodox Strategy #1. Set a Profit Target

Most business owners don’t take the time to set annual or monthly profit targets. The probability of hitting a target is much greater if there is one. So establish a profit target for the year and work towards that goal every month.

Unorthodox Strategy 2. Benchmark Your Company Regularly

A bank was worried about the performance of a customer. They were doing well on the revenue side; but were not making the money they should have been. After I did a benchmarking study of the client, I found that businesses in their industry were making $700k more a year than they were. They had pricing formulas out of kilter with the market.

Unorthodox Strategy #3. Your Business & the 3 Legged Stool

A 3-legged stool had great economic importance to large dairy farmers until the early 1950′s. It was an asset that allowed the farmer to milk many cows without tiring (can you imagine milking for 15 or 20 minutes on one cow without sitting?). For the 3-legged stool to be effective, it has to be strong, strong legs with a strong seat and the legs connected securely to the seat. It takes all four components to have an effective, strong stool.

Can you image how the farmer would act if just one of these legs was weak or brittle? He would be worried about falling down while doing his job of milking the cow – not a pleasant thought. So it is very important that the farmer be confident that all components of his tool are strong. He can depend on it and it gives him peace of mind.

Now allow me to explain how the 3-legged stool is structured just like a business. The four primary functions of the business are:

1) Marketing & Sales – without sales a business is dead and marketing is the precursor of revenue generation.

2) The Product or Service Provided by the company – if you don’t have a good service or product to provide to customers, the business is doomed.

3) Finance – money is the lubricant that keeps the business machine running – a machine that is well lubricated – will run forever with fewer problems.

4) The Seat of the Stool – that is management, the component that keeps the 3 primary legs of the business together: 1) sales/marketing, 2) product or service and 3) finance. The better these three legs, then the stronger the business and the greater likelihood the business can grow and maximize its potential.
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