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Planning to Improve Your Profitability

Thursday, January 12, 2012   By Mike Reddy


We often say "what you measure you can manage" and "what gets managed gets done".

When it comes to achieving greater profitability, truer words cannot be found. The fourth way of growing a business, which is improving the effectiveness of the things that you do, is a vital part of assisting you to better manage the results.

We often talk about the importance of focusing your profit improvement strategies into some key areas. They are to increase:

a) The number of desirable customers
b) The number of times each customer makes a purchase, and
c) The average amount they spend on each purchase

These are the major areas that can be managed by measuring their impact on overall profits and the good news is they can be measured with relative ease.

Identify your Critical Success Factors (CSF's) by asking three questions:

  1. What are your most profitable products/customers and what makes them so profitable?
  2. What resources are required to support your business?
  3. What are the things that keep your customers coming back, recommending you and paying a good price for your product or service?

Once these questions are answered you should then plan on how you can monitor the effectiveness. For example recognising your Key Performance Indicators (KPI's) and placing more or less emphasis on each area depending on the trend.
At the end of the day a profit improvement plan is only effective if your return on investment (ROI), your net profit margin and your bank balance are improved simultaneously. Constant review and management of your CSF's is the key to sustainable profit and ROI over the long term.
And that's exactly what our Financial Performance Reviews and Business Health Checks are designed to help you with. For more information call us on 1300 791 600 or email Mike Reddy at but we are willing to prepare the first 12 with our compliments.  We will analyse your last three years performance and you will receive a financial review including a written report worth $330 (including GST).  Just include the words "Jan newsletter offer" in the subject line, and leave the rest to us.

Mike Reddy is a Chartered Accountant, business coach and advisor helping businesses in Sydney, Melbourne, Brisbane and Gold Coast to easily increase their profits and cash flow. He is currently President of the North Sydney Chamber of Commerce, a Regional Councillor for Sydney North East and a member of the Institute of Chartered Accountants Sydney leadership team. As well as advising businesses, Mike presents business development seminars and webinars and is regularly contacted by the media to comment on small business matters. You can connect with him on Facebook, Twitter and Google+.