It’s easy to be intimidated by your competitors’ sales figures but these numbers should be of less concern than your relative profit margins.
Imagine you are in the top 50 of your industry Australia-wide and you get introduced to the owner of the number one performing business in your industry. You arrange for private lunch, a chance to speak one-on-one with a keynote speaker at industry functions, someone that runs a team of seven to your solo enterprise. He is the big dog on the block. This is your chance to find out what they do that makes them number one.
You’re sitting at the table in anticipation, waiting for some pearls of wisdom to come forth to help you get bigger and better. And then he arrives. You ask and he talks.
After an hour you work out two critically important things. Firstly, he is on his way to a heart-attack and an early grave by working ridiculous hours each week, and secondly you realise that every month you are making 34 percent more net profit than him.
That’s right one person outperforming seven, a difference of 938 percent profit per employee. This is a true story.
Three words that will change your business are – focus on profit.
It’s easy to be in awe of your competitors and try to work out their sales figures. But big numbers are largely irrelevant. They are only part of the game and when you constantly focus on turnover you are leaving out the most important part of the equation. You can’t survive or flourish unless your business is making a healthy profit.
Many businesses don’t increase the visibility of profit. To have a proper profit focus in your business you should stop waiting until the end of the year to find out if you have made any money or not. You should be looking at your figures weekly or at most monthly. Get your bookkeeper or accountant to do this.
For example, if you give quotes, build your overheads into your quotations so you know how much money you are really making.
Measure your profitability per employee per month. This gets you focused on getting the maximum bang for your buck out of your team. Check your profitability per customer. It most probably wouldn’t surprise you to know that those problem customers who expect the world and want to pay peanuts are costing you money.
Reward your salespeople based upon your most profitable lines not necessarily on highest sales figures. And obviously keep a tight control on your expenses – don’t spend money on things that aren’t going to make you a profit.
It may seem obvious but don’t fall into the trap of not looking at the bottom line at least once a month.
