The “Profits Leak Detective Newsletter” offers regular tips and strategies to help you identify and plug those leaking profits.
| Is your business like Grandma's axe? |
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A finely honed profit toolYou know the old story about Grandma's axe. She'd had it for many years, still insisted on chopping the wood for the fire. The axe was a good one, sharp, good balance, a strong handle. Grandma could really make the chips fly when splitting firewood. And over her lifetime Grandma's finely honed old axe had had three new handles and two new heads. But it was still Grandma's old axe. Is your business a finely honed profit tool; finding customers, delivering them value, making good profit, and able to do so without stressing you to the max, while giving you plenty of free time to spend with your family. Or is it a dull and blunt instrument, out of balance, bouncing of the timber it used to split with ease, and likely to give you splinters whilst using it? You see businesses, just like Grandma's axe, need to be continually updated and improved if they are to continue to be an efficient and effective profit machine. What makes up the handles and axe head in your business? There are at least five components I can think of: Your marketing & sales tool: How long is it since you had a good look at your market, whether there were any changes in it, what the competition is up to? And how long since you changed your approach to your market and updated your marketing approach and materials? Are your marketing efforts still getting the same return, or do they need sharpening or replacing. Your pricing tool: How long is it since you have reviewed your prices? More importantly, how long is it since you reviewed how you set your prices? So many small businesses set their prices by looking at their costs and adding a margin. What has that got to do with value to the customer? Sure, you have to know your costs to make a judgement about the gross margin needed, but that is only one aspect of the process. The customer doesn't know your costs. It's the value you add, the results you deliver that the customer is paying for. Your production tool: Whether you peoduce a product or service, you need to deliver it as efficiently and effectively as possible, at the right time, place and cost. Could you delivery process be sharpened? Are there elements that could be replaced with something which does the job for you more quickly, with fewer errors or at a lower cost? What are the constraints that could be holding back the value you add for your customers? Are there gaps between your desired performance and actual performance? Your administration tool: Your business administration, the office if you like, performs the critical task of enabling your production processes to work properly. Without effective financial management, purchasing or HR, for example, what you do to create and satisfy customers just won't work as well as it should. And if your administration is costing too much then the margin sales has to earn is higher, and the job is harder. Are there gaps between your desired performance and actual performance? Your processes and procedures: Have you ever seen professional axemen who compete at the local agricultural show? They keep their gleaming axes in a special case. The special case for your tools is the processes and procedures by which you use the tools above. But it is only a protective case keeping the tools sharp if those processes and procedures are documented. Because then they will be used the way they are supposed to be used. To quote E-Myth author Michael Gerber "Do you ever wonder where the profits really come from? It's your business systems that add value. It's your business systems that create profit." Like a good axe, keep your business tools sharp. Update and replace those parts that are worn and not performing and your business will be finely honed; finding customers, delivering them value, making good profit, and doing so without stressing you, while giving you plenty of free time to spend with your family.
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written by Chick J, June 27, 2009
Just read your case study. It was wonderful. Your views and ideas are very different from most site that talk about business. Extremely well-done.
... written by CJ, June 15, 2009
The business tools that people are coming up with, online, have been amazing. It's making things much easier. Do you have any Leads tips?
Depending on the amount of leads you are generating and sales people you have, there are a bunch of solutions out there. I use the small business version of Leads360, but you can try their Express product free at http://express.leads360.com Write comment
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