Article - Four Steps to Becoming More Profitable
Feb 09, 2022READ: 1 min
AUTHOR: Janusz Stabik
First let’s discuss what we mean by profitability……………….
In my experience the following is true:
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< 10% EBIT = serious operational issues
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10%-17% = doing ok, but we can do better
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17%-25% = we’re doing great
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>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)
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You’re (you and your team) not paying yourself a market rate salary
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You have really high levels of profit (more than 40%), but you haven’t accounted for your dividends in your own remuneration
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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:
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Fixing or sacking under-performers (clients, employees & services)
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Price increases
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Cost reduction
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Revenue efficiency (becoming super efficient at earning our revenue) through
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Systematisation of processes
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KPI’s, review, reporting and constant improvement
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Innovation
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Training and up-skilling
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Talent attraction and recruitment
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