ExcerptSharpening Your Profit FocusImproving profitability requires first that you focus on it. When you talk about your company do you describe it as a “$2 millions (sales)” company or a “$100,000 (profit)” company? When you talk about how you’re doing at the end of the day or week or month, is it in revenue or profit terms? Are your incentive schemes based on revenue or profit? Do you even know from month to month what your profit is? Though the specific steps will depend on the nature of your enterprise, here are several suggestions for sharpening your profit focus and finding ways to enhance the profitability of your business. Pay yourself first. This doesn’t mean you write yourself a check before you pay your employees, but that you account for yourself at the salary you deserve, rather than “what’s left over.” What do you think your time is worth? $100 an hour? $500 an hour? What would the profitability of your company look like if you paid yourself that? If you don’t like the answer, then dig into the underlying reasons. Develop a “Profit Paradigm.” Let’s say your business is currently producing a 10% profit. The conventional approach to trying to raise that number it is to examine your overhead and/or cost of sales and look for another 1-2% at the margin. That approach will often produce some results, particularly if you build in a process of constant reevaluation. But another strategy is to target a 20% net profit and figure out how to restructure your business to achieve it. Impossible? Maybe, but don’t underestimate what you can come up with by taking a more radical approach.
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