#0004 Work on your PROFIT to improve your CASHFLOW

Cashflow is probably the number one issue for many businesses I come across. In these uncertain times even more so. Most peoples initial reaction is to slash costs out of the business. This is often a neccesary step to ensure your survival but what do you do when there are no more costs to cut?

Look at improving your profit.

A slight change in your mindset to take you from cost cutting to profit improvement will not only improve your general attitude but will most likely have a greater effect on your bottom line.

So what is profit improvement?

The obvious answer is to sell more, increase your prices or reduce your costs. But these are not always possible.

An alternative way to increase profit is to look at ways your particular business can improve productivity. For some that means producing more widgets, for others its providing more services. Whatever business you are in there will be a few areas where if you can improve productivity, you are likely to improve your profit.

Where to Start?

• Define the primary things you do that make money.
• Look at and document the processes to do these primary things. Something worth asking in this part of the review “is there a better, more efficient way to do this task?” if there is, now is a good time to look at making some changes.
• Work out how long it would take your best performer to do this and take out any distractions that slow it down.
• This is now your optimum target.
• Now look at how this task is currently done in your business and take an average. I can almost guarantee that this average will be below the optimum target you defined earlier.
• Now break that process into lots of bite sized chunks and look at ways to improve each piece.
• Now use this to test and measure your employees on and work with each one to get them as close as possible to the optimum target.

By using these steps in each of the primary money making areas of your business you will have a greater and longer lasting effect on your profitability than short term cost cutting will ever have.