Article - Four Steps to Becoming More Profitable

articles finance operations tools / process systems strategy and planning Feb 09, 2022

READ: 1 min
AUTHOR: Janusz Stabik

First let’s discuss what we mean by profitability……………….

In my experience the following is true:

  • < 10% EBIT = serious operational issues

  • 10%-17% = doing ok, but we can do better

  • 17%-25% = we’re doing great

  • >25% = wow, we’re flying, what shall we do with the cash

HOWEVER, if you haven’t yet ‘normalised’ your profitability, we need to look here first. What do I mean by ‘normalised’ profit?

Well, if the following is true then your true level of profitability is actually much lower (and there’s some work to do)

  • You’re (you and your team) not paying yourself a market rate salary

  • You have really high levels of profit (more than 40%), but you haven’t accounted for your dividends in your own remuneration

  • You account for your clients media spend in your cost of sale

How do we become more profitable?

It involves a combination of the following strategies:

  1. Fixing or sacking under-performers (clients, employees & services)

  2. Price increases

  3. Cost reduction

  4. Revenue efficiency (becoming super efficient at earning our revenue) through

    • Systematisation of processes

    • KPI’s, review, reporting and constant improvement

    • Innovation

    • Training and up-skilling

    • Talent attraction and recruitment