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With economy purring, time to look at profits

The economic recovery is underway. In fact, it’s been underway for some time now. Yet some business owners act as though things are still depressed. They are glad they are busy and think that is enough. They are reluctant to plan.

No, I’m not talking about a business plan, although making such a plan is a good idea. I’m talking about a smaller but more important project. It’s time for a profitability plan – a plan specifically designed to allow you to increase your profitability.

Let’s back up for a moment. We know one significant advantage of independently owned businesses is their ability to react swiftly to changing circumstances. As the economy contracted and growth became slow or nonexistent, you tightened your belt, reduced your margins and saw your reserves shrink. Now that things are improving, what have you done or are you doing to reverse that coping state of mind?

What are your competitors doing? Have you become the low-cost supplier because you’ve failed to monitor the market? When did you last raise your prices? Perhaps a better question is to ask when you last increased your gross-profit margins. Some businesses have increased prices to compensate for increased costs but have not gained back the margins they cut to stay in business during the tough time. Are you rebuilding your reserves to protect against the next bump in the road?

Pricing and increasing margins are important parts of the puzzle but far from the only parts. Have you changed your advertising to reflect improving times and changing markets? Is your market the same, or have some of the old customers gone away and need to be replaced? Have you updated your selling tactics and trained your staff? Do your employees know the recession is over, or are you communicating the same old fear-based frame of mind to them? Is it time to implement an incentive-compensation plan?

I just touched on state of mind. How is yours? It’s a cliché but true that attitudes are caught – caught by your customers and by your employees. I know business owners who don’t ask prospects to buy because they are convinced the prospect has no disposable cash. Are you selling up like you used to? Are you pushing for the add-on sale? Are you actively seeking specific new customers? Are your premises clean and updated?

By now you may be saying to yourself that there is nothing new in the points I’ve made, and you would be correct. However, that is not the point. The point is whether you are applying these time-tested tactics. Are you taking action to improve profitability? What specific action steps will you take today, this week, this month to increase your profit? What is your profitability plan? Many owners react swiftly to the signs of a downturn, but only a relative few react as swiftly to the signs of the upturn. You are losing out if you are not quickly catching up.

Some important tips: A profitability plan, like a more complete business plan, must be specific, have deadlines for each action step, be in writing and communicated to every employee. In fact, ask your employees to help craft the plan. Don’t delay another day.

Bowser@BusinessValueInsights.com. Dan Bowser is president of Value Insights, Inc. of Durango, Chandler, Ariz., and Summerville, Pa.



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