Profitability is the primary measure of a company’s success and is essential to business sustainability. While there are many key performance indicators to measure on a daily, weekly and monthly basis to identify how well a concrete products business is performing, and different financial ratios that indicate business health, bottom line profit is the number most important to owners, stockholders and managers. Here are eleven key elements to improve operating profit margin.
- Eliminate activities that don't add value to the company or customer. Every dollar you save by eliminating wasted effort drops directly to your bottom line.
- Give your team a clear picture of ways they can contribute to profitability. Every team member is an agent to increase revenue and decrease costs. Empower them to be part of the search for ways to increase profit.
- Look for ways to increase value to clients and customers. A focused effort will help shorten your sales cycle, increase your close rate, improve retention, and perhaps increase pricing.
- Beware the steep cost of attrition of both customers and employees. Retention is a strategic expense, if spent wisely.
- Strategically map out a pathway to upgrade your top 10% to 20% of clients to "red carpet" or "highest value" offerings. They will value this service – and pay for it.
- Track the gross margin dollars and percent by salesperson. Be transparent about this measurement and let it spark healthy competition among sales team members.
- Develop a targeted plan to optimize the point of purchase with higher value-added services and accessories.
- Make it easy and simple to buy from you. Proactively address customer frustrations and hurdles to repeat business opportunities.
- Consistently look for ways to streamline your fixed overhead. Scrutinize your base expenses to eliminate non-strategic costs that just don't add value.
- Standardize your production systems as much as possible to minimize the number of suppliers you use. Using fewer suppliers gives you the opportunity to leverage purchasing power and reduce the need to stock as much in parts and raw materials inventory, which affect cash flow and gross profit margins.
- Use a procurement card for small dollar purchases and eliminate the associated administrative costs of processing requisitions, purchase orders, invoices and checks.
Each of these activities will contribute to your bottom line. Increased profits mean increased success and business sustainability. Contact the experts at The Roebuck Group to learn more. There’s no time like the present to get started!