profitability

Profitability

11 Jun
by Bridget DiCello

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?

 

“Good” isn’t enough, bring me the data!

17 Apr
by Bridget DiCello

“How is … going?”  You fill in the blank.  What have you asked your team about?  Projects?  Sales?   Customer satisfaction?   Daily tasks?

And have you heard in response, “Good!” or “Fine.” and wondered just what those phrases really meant?  Sometimes they mean to communicate:

  1. “Things are not all that great right now, but we’ve got a solid plan to address them.”
  2. “I’m really not sure how things are going, but nothing appears to be in fire, so I think we’re okay.”
  3. “If I say, ‘Good!’ or ‘Fine.’ you will not worry as much and give me some room to go figure out how things are really going.

This is not only the case if you have a few slackers on your team who avoid accountability.  In many very successful businesses, even good performers may not have a handle on specifically how things are going.  There is this common aversion to data collection and analysis in many organizations because it requires time and effort that could be spent doing things instead.

Brad Robertson, Chief Financial Officer (CFO) St. Francis Hospital has a sign hanging in his office which reads, “In God We Trust, all others bring Data.”

What data might your team need to bring you?

  • Customer service metrics
  • Sales and Pipeline data and pipeline building activities
  • Profitability, and the related pricing, expenses, execution, rework, delivery
  • Company overall health – current assets, long term liabilities
  • Where we are, where we’ve been, trends, projections
  • Industry specific measurements

How often do you need to see this data?

Part of the objective of gathering data is that the process can become part of the daily routine, so metrics are gathered and reviewed routinely (at least monthly, more often for some metrics), not only by a leader, but by team members as well.  If a doctor had to assess you without any tests, lab results or equipment such as a blood pressure cuff or stethoscope, and only saw you once in a while, an intuitive doctor might be able to make some guesses, but you would not have the same opportunities for good health.  It’s the same for the business or department you lead.

Identify the right data to gather, the easiest way to obtain it, a set time to review it, a consistent way to use it for making solid decisions, and stay consistent in that process.

On a final note, for those of you reading this who think that data is fabulous and you could spend all day just gathering and analyzing because there is so much good information to be gleaned, be careful to balance the value of gathering and reviewing accurate data with the objective of using it to improve business processes and ensure greater success.

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