Profitability

Increasing turnover is a critical element for any business to grow, however, it is important to understand a number of factors to ensure you target the right business opportunities. Analysing your customer base will show you where to focus your energies. Businesses are often surprised to find that their biggest client does not generate the returns the turnover would suggest. Understanding the true cost of your product or service offering will enable you to be competitive but allow you to walk away from non-profitable business secure in the knowledge that it was the right thing to do. Understanding how your cost base (fixed, variable and overheads) affects the bottom line will allow you to reduce unnecessary expenditure and channel resources into the right areas to help grow your business. At some point an increase in turnover will result in additional fixed cost and needs to be factored into expansion plans. Understanding your skills base and reviewing how staff are being utilised within the business can have a significant impact on overall performance. Your requirements change as the business grows and matures. Staff often continue to perform the same tasks over time and do not adapt to the changing environment. Reassessing your needs will help utilise and streamline your employees more effectively. Building financial models which incorporate the different factors and variables will allow you to assess the effects that increased turnover; pricing and costs will have on profitability. This will allow you to determine an optimal operating level.

Areas to analyse could include:

  • Cost Reviews
  • Customer Analysis
  • Operational Efficiencies
  • Product Pricing