By Ian Baxter, owner and chairman of Baxter Freight
Profit is the lifeblood of any business – it’s certainly not a dirty word! Yet when it comes down to it, many businesses aren’t as profit-focussed as they could be.
Before I offer my advice, when I talk about profit focus, I’m talking about focus on “sustainable profits” – by which I mean those derived from an approach to doing business that’s likely to be enduring even when the market gets competitive. It’s not about ripping people off – it’s about maximising your business’s impact.
My caveat out of the way, I believe doing these eight things will make a real difference to your profitability. They’re not that complicated and can be done immediately.
Focus your team on making profit today
When I joined RH Freight, I asked a manager how the month was going. He said he didn’t know because he always looked at profitability at the end of the month. We changed that approach completely so that all revenue generating staff knew exactly what their targets were and how they were doing on an hour by hour basis. Immediacy changes everything. Do it now!
Get staff to take ownership of your profit targets
By aligning their interests with yours, you can get staff enthusiastic about making record profits. Offer the opportunity to earn bonuses (yes, bonuses) if targets are hit. Bonuses should be earned from sustainable profits and measurable performance. Managed properly they’re a brilliant tool for rewarding staff based on performance (and are great for morale).
Encourage your team to make suggestions to improve efficiency
So often managers rely on their own ideas about how to get the job done. This often leaves the people who actually do the job wondering why they have to do it that way. So why not ask your staff what improvements they would make if they owned the company? Show respect for their ideas, even if some are impractical. That way, they’ll feel encouraged to make further suggestions in the future. Their opinions are very valuable.
Make sure you charge for the value you’ve added
Ultimately pricing is not about being the cheapest or the most expensive; it’s about making an assessment of the value you’ve added and charging for it. If you’re not adding value you’ve no business doing business, and if you are adding value the customer should be happy to recognise that. You should continually assess this question to make sure you’re always competitive and properly paid for the work you do.
Never assume that the cheapest supplier is best
Be happy to pay for high quality suppliers, but think about the ways you can make your money go further. Form good long-term relationships with suppliers and help them cut costs so they can pass savings on to you. Offer reciprocal business and other non-financial concessions to secure a better deal. Be happy to give a customer a testimonial praising their service. This costs nothing, and creates goodwill. You could even consider asking for an end of year rebate based on the volume of work you’ve given.
Take the time to consider how best to carry out tasks in advance to reduce the risk of costly mistakes and increase cost effectiveness. Set the customers’ expectations correctly and take care to ensure suppliers quote for everything you need – nothing more and nothing less.
Keep it simple
One of the hardest things in business is creating and maintaining a simple business model. It’s really tempting to allow complexity in – but resist this with all your might. To me a profitable business is generally a simple business that focuses on doing what it does best, rather than spreading itself too thin.
Remember to cultivate good relationships
Never, ever forget that business is ultimately about people. Build a strong team, get them engaged, use their skills, keep them focused, enlist their help. Do everything you can to optimise the relationships you have with customers and suppliers. Work hard to build trust. Bend over backwards to be helpful and fair. That way more and more people will be on your side, happy to help you become successful. You cannot do it alone!