All businesses set out to make money, but many don’t watch their profitability closely.
At the risk of covering the basics, humor me for a moment. Have you ever gotten so busy doing business, working with customers, getting new customers, paying bills, delivering your product or service or putting out fires that you don’t pay attention to whether or not you are making any money doing what you are doing?
What was your profit margin in May? What were your profit margins on each type of product or service, or by job or client? What do you want or need your profit to be able to invest back into the business and still retain some profit for the owner?
Even if your profit margins were good, your total dollars of profit may not be enough if your sales are not high enough to cover your overhead costs.
Increasing your margin comes from setting your prices correctly and decreasing what it costs you to produce and deliver your product or service. If your teams are killing themselves and you still struggle with profit margin, maybe you have to look at your pricing. If your pricing cannot go any higher based on the market, you need to ensure you have talented people doing the job well the first time, effective communication with customers, tools and equipment that work well, and systems and processes that are efficient and eliminate waste.
If your bottom line profits are not enough, often you have to ask yourself if you have created a company that running at its best, will produce a profit? If your current team is productive, efficient and running at capacity, and your profits are still not what you want them to be, then maybe your ‘machine’ is broken.
If either your profit margin or profitability are not where you want them to be, don’t just work harder; stop and determine exactly where the problem lies, and work deliberately towards a solution. Too often, hard working people will work their tails off doing some of the right things, but also some of the wrong things to improve profitability. For example, taking care of customers may always seem like the right thing to do, but if you are doing it because an error was made by someone on your team, or you are spending time on a far less than ideal client (based on your niche), then you are not contributing to an increase in profitability.
What are you working on in June to increase your profit margins? What initiatives are you working on in June to increase your overall profits?