Ask someone what their business target is, and most likely you’ll be given a Sales or Revenue figure that they are aiming for…
They will discuss annual budgets and forecasts, comparing sales growth to last year or the seasonality of the business they are in…
People talk in terms of the “size” of their business rather than the profitability of it or its ability to generate cash…
So what Targets should you have for your business…?
Well for a start, begin with Cash flow not Sales as your objective. Remember, Sales is Vanity, Profit is Sanity but Cash is Reality…
Once you have your required cash flow requirements, you can work out what net profitability you’ll need and then work your way up to gross profit and finally a sales target…
Sales is simply the mechanism with which we generate profit and cash – it is a consequence of our activities not the driver of them…
What is your break-even point…?
If your business makes 10% net profit, then you will break even around lunchtime on November 23rd…
In other words you are working for nearly 11 months to just pay your fixed costs – not very exciting is it…?
If you apply that to your working day, then you are breaking even at around 10 past 4 in the afternoon…
Doesn’t leave a lot of room for manoeuvre…
So how can we break this cycle…?
For a start we can become more ambitious with our profitability levels; both gross and net. How about if we had a breakeven target of end of September rather than the last week in November…?
What would that do to your business…?
Then we need to focus on the factors that contribute to the profitability of the business; and it doesn’t have to be just getting more sales…
Within every business there are hidden pots of cash – it could be that we need to buy more effectively, produce more productively and work more efficiently. Sometimes simply getting more sales is the wrong strategy completely – sometimes we have to make the business work at a lot closer to its full potential first such that when sales increase the benefits are amplified…
I will explain how important it is for your business to setup a Profitability Goal.
For example, you are selling this month products for the amount of 100,000 euro.
The costs you have made this month is 90,000 euro. So, you got a Profit of 10,000 euro this month.
In order to double your Profit you have to sell twice the amount of products.
If you, instead of having a look at how many products you need to sell, have a look at the Productivity and Efficiency of the employees and processes within your business and improve these it is guaranteed to lead to more profit.
Besides the clients, and of course you really do need them, there are a lot of processes within your company that contribute to your profitability and must run as smooth as possible. There have to be a good and clear balance within those processes in order to get the best out of your company.
You can have as many clients as you want, but if the processes in your company are not running at their maximum possible, you will simply lose money on every client...
Rather than making sales, some companies would be better off simply sending their clients a cheque each month instead…
Are your employees working productively and efficiently enough?
Are the processes they have to work with productive and efficient enough?
Are other processes running as smooth as they should be?
How productive and efficient are YOU working in your company?
Just some questions to ask yourself about your company.
With one simple question you can already do the first step in improving your Business.
How Productive or Efficient is …… ?
Most of the times you already know which processes could be improved. Some processes are easily to improve by yourself, other processes need to be analysed first.
And this is where Business Improvement companies like AliaVita are for.
“In order to get the maximum Profitability out of your company
you need to have the Productivity and Efficiency at their max possible.”
Two questions for you to check where your company is now…
- On a scale from -10 to +10 what number would you give for the Productivity in your business at this moment?
- On a scale from -10 to +10 what number would you give for the Efficiency in your business at this moment?
Fill in the point in on the chart below. The Y axis is for Productivity, the X axis for Efficiency.
For example, if you think the productivity is fine (5) and the efficiency is not that fine (-2), you put a dot in the chart on (-2,5)
If you end up in the GREEN area, but not at the top right, your company is doing fine already but could need some little improvements to get to the top right.
If you end up in one of the LIGHTER GREEN area´s you will need to improve Productivity or Efficiency in order to get back on the right track again. For example, in the first chart below, if you improve the Efficiency to +5 the balance between the Productivity and Efficiency will be fine again and from there on you go up to the top right for the maximum improvement.
If you end up in the RED area, you really need to call us right away. We will help you getting back on track up to top right in the GREEN area where your business should be!!
In order to get your Business to the maximum Profitability possible you need to improve the Productivity and Efficiency of your business together. If you just improve one of them, you never will reach the maximum out of your Business.
So where do you want YOUR Business to be? Exactly… at the star in the green area !!!
Using the example above, if you improve the Profitability by 10% you will have a profit of
20.000 euro that month instead of 10.000 euro. This means a Profit increase of 100% !!!
I hear you asking yourself “this is what we are looking for, but how can we do this…?”
Especially to improve YOUR Business growth to the Maximum Profitability, AliaVita has developed a 7 step Business Improvement Program called The PEP Talk Program.
We focus on the factors that drive your profits, we look for the hidden cash that is in every business and enable you to release it…
With The PEP Talk Program your Business processes will be analysed, improved and monitored to get the best out of YOUR Business. Guaranteed !!!
Want to find out if this Program is something for YOUR Business?
Just sent an email to email@example.com or give us a call at +352 621 356 601 to book your free meeting.
And…. The first 3 to respond will get the book ´How to Improve the Productivity, Efficiency & Profitability in YOUR Business´ for FREE
Looking forward improving YOUR Business!!