Plug Your Business Profit Leaks

Over the years I have helped many small businesses to improve their profit. In most cases, my recommendations and suggestions are pretty obvious. However, the problems are not obvious before I carry out an analysis of the business.

The reason for this is simple. When you are running a business in which you have invested your time, money and passion, it is almost impossible to look at it dispassionately. Standing back and objectively looking at your business can make you thousands of dollars of extra profit.

When you are a consultant, it’s relatively straightforward to analyze someone else’s business because there isn’t the emotional link that affects your judgment.

There are some things that you can do to identify opportunities for improvement in your own business without the aid and expense of an outside consultant.

First of all, it’s necessary to understand that nearly every business has opportunities for growth and improved profits that have not been exploited. Frequently, the business owner is too busy to recognize these opportunities, even though, he or she could improve business profits.

Secondly, most businesses have a product, a division, a type of customer or a marketing method that is not producing sufficient profit. These activities are actually costing more than they are worth and should be cut. Often, the business has grown up with these activities and no one has ever questioned these profit leaks before.

If you analyze your own business by standing back and look objectively at all your activities you may find some unwarranted costs or some areas that require even closer scrutiny.

When you start looking at your business, it pays to remember the principle of 80/20.

You may find, as a result of your analysis, that 80% of your profits come from 20% of your business. You may also discover that 80% of your problems come from 20% of your business. Provided it’s not the same 20%, you are in a good position to start instituting changes to plug up profit leaks.

When you carry out this sort of analysis, you have no alternative but to look at changes that will reduce unwarranted costs and take advantage of unfulfilled opportunities. In this respect, you then become your own consultant. A note of caution, this is not an easy exercise to divest yourself of the sentiment, the performance of the people and your own deep involvement with the creation of the business.

For those that find it possible, there are considerable benefits. Savvy

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