Article - Four Steps to Becoming More Profitable
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:
Fixing or sacking under-performers (clients, employees & services)
Price increases
Cost reduction
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
