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Introduction Everyone wants to make more profit to help turn
their dreams into reality. Very often we get bogged down in the running
of the business, rather than developing the business. Many business owners
start in business because they are good at their trade. However, they
often do not have the entrepreneurial skills to develop the business to
it’s full potential. Is your business now, how you imagined it when
you set off in business or has it lost the way a little.
This profit improvement health-check
is designed to cover all of the common (and a few obscure) ways of improving
the profits of your business and is a starting point for seeing how much
more you could be doing to develop the business. However, you must take
action if this is to turn into increased profits This is where we can
also help you in assisting with the implementation of any ideas. As accountants
we want to do so much more than be bean counters.
We hope this health-check identifies
some new profit improvement ideas for you. If it doesn’t at least
you can sleep safe in the knowledge that you are probably doing most things
necessary in your business to maximise the profits.
The checklist should take no more
than 20 minutes to complete. You can print it off and complete off line
if you prefer.
You can then arrange to meet with
us in person to go through any areas where profit improvement opportunities
have possibly been identified.
If there are any areas you are interested
in that your accountant hasn’t already spoken to you about, tick
“No”. If they have, tick "Yes" or if you don’t
feel it is an area of interest, tick N/A.
Keeping it simple The profit of any business is simply it’s sales less it’s
costs. Therefore to increase profitability we simply have to increase
sales or decrease costs. However, there is no limit by how much sales
can increase whereas costs cut only ever be cut to a minimum of zero.
Therefore, whilst costs need to be looked at, better results are normally
gained from concentrating on sales.
Logically, there are 3 main ways
in which sales can be increased:
Increase the number of customers
– this is both gaining new customers and keeping existing customers.
Getting the customers to buy
more often.
Increasing the value of each
sale – either by increased prices or getting the customers to buy
more each time.
You will see we cover these 3 areas
in the checklist. Some points are applicable to more than one area but
have only been included in one place.
Whilst every effort has been made
to ensure the accuracy of this publication we can accept neither any liability
for any errors or omissions contained herein nor liability for any person
acting or refraining from action as a result of information contained
here. You must meet with us to discuss your personal circumstances.
Overview
Has your
accountant mentioned this?
1
Don’t set out without knowing where
you are trying to go. Otherwise you probably won’t get there.
You should have up to date written goals for both personally and for
your business. Research shows that those with specific, measurable,
awesome, realistic and timed goals are far more likely to be more
successful.
Yes
No
N/A
2
If you enjoy your business research shows
you are far more likely to be successful. You should consider how
much you enjoy your business and what stops you from enjoying it to
it’s full potential.
Yes
No
N/A
3
Ask yourself what the biggest challenges
are facing your business. By identifying the challenges you can then
set about solving them. Try to think of challenges rather than problems.
Yes
No
N/A
4
You should consider what you would like
to do in your business that would fundamentally change the way your
business works, which is presently impossible. By asking this paradigm-shifting
question you can start to come up with answers to seemingly impossible
questions. Without thinking about what is impossible you will never
come up with the answer.
Yes
No
N/A
5
Have you considered comparing your business
against the best and the average for your industry? By benchmarking
your business, you can see how you compare to the competition and
where there is most potential for improvement.
Yes
No
N/A
6
Businesses built on systems as opposed
to relying on the owner to work in them are worth more, make more
money and are far easier to sell. You should therefore work on your
business rather than in your business. A must read book on this subject
is the E-Myth by Michael Gerber.
Yes
No
N/A
7
Time is a limited resource that once gone
is wasted forever. The average 40-year-old man has just 180,000 waking
hours left to live before he dies, so try not to waste them. You should
use proven time management techniques in order to make sure you make
the best use of your time. Make sure you prioritise and delegate.
Yes
No
N/A
8
Businesses that focus on a limited number
of products often do better than those trying to sell too many different
products.
Yes
No
N/A
9
Have you considered what potential of the
people in your business you use. Sir John Harvey Jones found that
he never found a single company that he could honestly say used more
than 50% of their potential. There are a few more people potential
checks at the end of this health-check.
Yes
No
N/A
10
Remember Pareto’s law (the 80/20 rule),
which applies to most things. Often 80% of your profits will come
from 20% of your customers and 80% of your hassle will come from 20%
of your customers – who are often worth getting rid of.
Yes
No
N/A
11
Make sure your prices are set for maximum
profit. Do you know how many customers you would lose if you put your
prices up by 10% and what effect this would have on your profit. For
example, if you have a 30% gross margin and lost 20% of your customers
you would be making more profit by putting your prices up (and have
less work to do!)
Yes
No
N/A
Gaining and keeping
customers
12
Remember it costs 5 times more to get a
new customer than it does to keep an existing customer. So looking
after existing customers is crucial. They are also easier to sell
additional products to. Businesses can only succeed in the long term
by adding value to their customers. The customers must perceive that
the benefits you offer are more than the perceived price. The bigger
the differential, the more value the customer perceives. Adding value
by giving customers more benefits is normally more successful than
cutting prices.
Yes
No
N/A
13
Do you measure the satisfaction of your
customers. Only if you measure it can you know what needs doing. Research
suggests that dissatisfied customers are 20 times more likely to tell
someone than an unhappy customer. This means if 95% of your customers
are happy, there will still be more negative messages being spread
about your business than positive messages.
Yes
No
N/A
14
If you respond to complaints quickly and
properly you end up with a happier customer than before the complaint
arose. Look upon complaints as opportunities.
Yes
No
N/A
15
You should think of all the ways you could
wow your customers. For example, this may include some of the following:
Yes
No
N/A
Always exceeding your promises.
How you respond to telephone enquiries.
How you do the first meeting with a prospect.
What your reception area is like.
What your proposal letters are like.
Taking out a subscription to a magazine for a
prospect.
Nominating them for business awards.
Sending them anniversary presents.
How you make a first impression.
Sending thank you notes when customers pay.
Letting them know your unique selling points.
Using CD Rom business cards.
16
Look at what other great businesses in
different industries are doing to attract new clients and see if this
can be applied to your business.
Yes
No
N/A
17
Run a premier club for your most important
customers. For example Viking have a Premier Hotline with a different
number for their most important customers who have additional privileges
such as free delivery on all orders.
Yes
No
N/A
18
Arrange reciprocal deals with other businesses
so that they recommend you in return for a commission.
Yes
No
N/A
19
You should determine how much sales activity
you need to do in order to reach your target. For example, if your
target is 10 new customers do you know how many mail-shots you need
to send out based on the number of leads this generates and the conversion
rates on the leads.
Yes
No
N/A
20
The secret to winning most business awards
is simply to enter them. If you win an award this can be a real benefit
in your marketing. Few businesses enter them, so the secret is simply
to enter. That’s how others have won them.
Yes
No
N/A
21
By forming associations with other businesses
you can both be in a win-win situation. Some businesses have customers
who buy your type of products and you have customers who could buy
theirs. Make offer’s specifically for their customers and they
can do the same to yours.
Yes
No
N/A
22
Ring all of your competitors listed in
the phone directory trying to find any disconnected numbers. If you
come across any, ask BT to allocate the disconnected number to you
so you then pick up the benefit of their old advertising.
Yes
No
N/A
23
Consider whom else gains when you increase
your sales. Often it is your suppliers. You could get them to promote
your products or contribute to your promotional costs. There may be
other things they have that could benefit you such as mailing lists
that won’t cost them a penny to provide.
Yes
No
N/A
24
Conversely, think about whom you could
help to grow their business and in return yours will grow to. For
example if a solicitor helps an estate agent get more sales they will
benefit too.
Yes
No
N/A
25
You should have a number of systematised
referral methods in place to help gain more customers? These can include
the following:
Yes
No
N/A
Asking all customers if they are happy with each
delivery and at the same time asking for a referral.
Offer a price reduction in exchange for a referral.
Asking for referrals in customer satisfaction
surveys.
Automatically asking people you meet for referrals.
Always ask for a referral whenever you win or
lose a customer.
Give referrals to other people so they will be
encouraged to refer others to you.
Offering referral vouchers to your customers to
give away to their customers in exchange for say a discount on
your products.
26
Only if you send press releases will you
get any press coverage to promote your business. Local and trade papers
are looking for stories to fill space so send them interesting articles
about your business but don’t make them read like an advert.
Send copies of press releases to prospects, even if they don’t
make the paper. Include a free reader offer.
Yes
No
N/A
27
Are your guarantees better
than your competitors? If not, look at how you can improve your guarantees.
Often this can be done without costing you anything. For example,
TGI Fridays where you don’t pay if your food isn’t on the
table in 10 minutes. They do this because they know they can do it.
Look to offer guarantees your customers want to hear, that no one
else dares to make and fulfill that guarantee better than any of your
competitors.
Yes
No
N/A
28
Are you persistent in chasing new customers?
Did you know that research suggests that 73% of sales people say No
at least 5 times before saying Yes and yet 92% of sales people give
up before the 5th No. Therefore, the 8% who go the 5th No make 3109%
more sales than those who don’t. Persistent pays. Make sure you
have systems in place to make sure this happens.
Yes
No
N/A
29
Testimonials (written from customers) are
extremely powerful in gaining new clients. The easiest way to get
them is to ask for them. What better than your existing customers
saying great things about you. Write what they say down and give this
to them to make it easier for them to type on their letterheads. Take
them around in presentation binders and display in your reception
area. Even attach them to proposals.
Yes
No
N/A
30
Look at what your existing customers biggest
complaints and frustrations are, look at how you can solve these and
then let everyone know how they are solved.
Yes
No
N/A
31
Use 0800 free-phone numbers to encourage
customers to call you.
Yes
No
N/A
32
Always try to add value whenever you follow
a prospect up. Tell them something that will be of benefit to them.
Yes
No
N/A
Getting customers
to buy more often
33
Look at selling your products under licence
as opposed to an outright sale or a regular maintenance fee for upgrades.
Yes
No
N/A
34
Make it so simple for your customers to
order more. For example provide them with a pre-printed order forms
for all the things they normally purchase from you. Put your product
codes on all your products, not just in the catalogues. For example,
an electrician after doing some work could leave a sticker next to
the fuse box.
Yes
No
N/A
35
Offer add-ons. For example a boiler supplier
can offer an annual maintenance check or a photocopier seller could
offer to supply copier paper.
Yes
No
N/A
36
Recommend other people’s products
in return for a commission on the sale.
Yes
No
N/A
37
Offer special deals to encourage customers
to buy more often.
Yes
No
N/A
38
Make special offers only available to customers
who haven’t bought for a while. This could be by flyers going
just to them.
Yes
No
N/A
39
Run customer contact programmes and try
to add value when you do contact them.
Yes
No
N/A
Increase the value
of each sale
40
Look at bundling products together and
offer them at a beneficial price. For example, buy a pair of shoes
and get some shoe polish at half price. Or buy 2 get 1 free.
Yes
No
N/A
41
Look at increasing the size of products
at beneficial prices. For example, a McDonalds large meal with large
fries and drink for just an extra 30 pence.
Yes
No
N/A
42
Do you ask the right questions when each
sale is made to determine if there is an opportunity to make another
sale at the same time. For example, when selling a camera do you ask
the customer Why he wants the camera? In this case it is obvious and
should lead to you saying that some film will be needed and a battery
to make it work. Do you know all the why questions you should ask?
Yes
No
N/A
43
Use Window of Opportunity (WOO) Charts.
These are a simple spreadsheet with all your products on one axis
and all your customers on the other and simply colour the squares
when you sell a product to a customer. The uncoloured squares are
then the windows of opportunity. You make sure all salesmen tell customers
about the products they are not buying. You can add other people’s
products to it as well for introductory commissions and a referrals
column to find out whom you are getting referrals from. The pioneer
of WOO charts (Peter Thompson) has successfully used them with thousands
of customers with thousands of products.
Yes
No
N/A
44
Can you increase your prices by just
1% without a fall in quantity of sales? If you can, this can mean
a rise in profits of 20% for the average UK company.
We have various methods and tools to help you look
at this. For example, take a look at our price
setting example and price
setting tool that helps you to gauge the optimum price for
your products or services.
Yes
No
N/A
45
Look at how you can charge more without
losing any customers. For example:
Yes
No
N/A
Break the price up into small lots (e.g. rather
than spending £200 a year on lottery tickets it is £1
a ticket).
Reduce the discounts you offer.
Offer more discounts as customers buy more.
Offer better guarantees.
Describe prices as “investments” rather
than costs.
Warn customers in advance of price rises but then
make the actual rise smaller than you indicated.
Explain why prices have to rise.
Charge for delivery, insurance, installation etc
so they are not seen in the headline price.
When increasing the prices of many items reduce
the prices of a few and point these out.
Don’t just reduce prices. Try to trade a
price reduction with a customer by taking something out of the
package or exchange something (e.g. referral)
46
Make sure the commission schemes you offer
are designed to make more profit and not just more sales. Commission
should be a percentage of the profit, not the sale. This helps avoid
over-discounting.
Yes
No
N/A
47
Don't offer early settlement discounts.
They rarely work in encouraging early settlement and even slow payers
start deducting them from their payments.
Yes
No
N/A
48
You can't make any money out of people
who don't pay. Vet customers before offering them credit. Make sure
you invoice on time and have a system in place for debt collection.
Yes
No
N/A
Cost reduction
49
Look at moving your employees onto yearly
hours contracts to improve productivity. Rather than doing 48 weeks
a year, 5 days a week, 7 hours a day, move them to contracts of 1680
hours a year. This way you can use them more in your busy periods
and let them have time off when not so busy. Employees often like
it because it can give them large blocks of time off at a time and
you will like it because you don't have staff sitting around doing
nothing.
Yes
No
N/A
50
Have you looked at changing your telecommunications
suppliers? The market is now far more competitive with massive savings
to be had on calls. Least cost routing through call brokers can often
reduce phone bills by as much as 40%.
Yes
No
N/A
51
Reduce your advertising costs by sending
your camera ready artwork to the publisher with a cheque for say 20%
of the list price together with a covering letter authorizing them
to cash the cheque and run the advert whenever they have space left
over. Most publications have some and would rather have something
than nothing.
Yes
No
N/A
52
Put in place purchase order systems to
ensure all purchases are authorised, delivered and the correct amount
invoiced.
Yes
No
N/A
53
Never sign up at a first meeting, however
good the deal looks. Take time to consider.
Yes
No
N/A
54
Consider appealing against your rates assessment.
Many are higher than they should be.
Yes
No
N/A
55
Look at whether any of your existing staff
could be moved onto a subcontractor basis and work for you on a self-employed
basis rather than as employees to save plenty of national insurance
and avoid the red tape of employment legislation.
Yes
No
N/A
56
Make sure you employ an accountant who
is on your side and is looking and able to slash your tax bills.
Yes
No
N/A
57
Many professional advisers offer free consultations
for a first meeting. Take advantage of them to find out who will be
able to offer you the best advice and value.
Yes
No
N/A
58
Offer to settle bills early in exchange
for a discount when you buy.
Yes
No
N/A
59
Did you know that there are hundreds of
different types of grants available for businesses? Find out if you
are missing any.
Yes
No
N/A
60
Many government agencies offer free or
low cost advice to get you started, as will your bank manager in getting
started.
Yes
No
N/A
People potential
61
Run brain storming sessions with your staff
to get wow ideas from them and to find out what businesses they admire
most and why.
Yes
No
N/A
62
Do you run suggestion schemes for your
staff that encourages them to make suggestions? You can even pay your
staff tax-free for the suggestions.
Yes
No
N/A
63
Have a learning zone whereby all staff
contribute one written idea a week to share with everyone else.
Yes
No
N/A
64
Recruit the right people and empower them
to take responsibility.
Yes
No
N/A
65
Keep your staff up to date with the right
training.
Yes
No
N/A
66
Talk and communicate to your staff.
Yes
No
N/A
67
Ask your staff to put on their timesheets
a score out of 10 for how happy they were at work this week and monitor
it.
Yes
No
N/A
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