[vc_row type=”in_container” full_screen_row_position=”middle” scene_position=”center” text_color=”dark” text_align=”left” overlay_strength=”0.3″][vc_column column_padding=”no-extra-padding” column_padding_position=”all” background_color_opacity=”1″ background_hover_color_opacity=”1″ width=”1/1″ tablet_text_alignment=”default” phone_text_alignment=”default”][vc_column_text]You are closing more sales, delivering more products and services, but profits are sharply getting smaller. How does this happen when business is booming?What’s worse is when you can’t put your finger on what’s causing the downturn and you know that you are leaving money on the table. Park Systems Inc. was experiencing this uncertainty almost a year ago.
The Investigation
Investigate the causes of deteriorating profitability by taking the following actions to reveal the number story of your business.
MANAGERIAL REPORTS . Take a look at your management profit & loss reports. Do the P&L reports have the line items that help you make decisions? For example:
- Is revenue reported by product/service categories that make sense?
- Can you match the direct cost to each product/service revenue category?
- Can you run P&L reports for projects and customers?
- Do you know what the unit cost of your products and services?
- Are the P&L reports easy to understand and use?
PRIOR YEAR COMPARISON. Changes in gross profit margin indicate that there are pricing and/or direct cost considerations to dig into. Do this by comparing the current profit & loss report with the prior year P&L.
PEER BENCHMARKS. Go a step further by comparing your P&L to industry benchmarks. This will evoke additional critical thinking about pricing, revenue earned per labor unit, direct cost management, overhead investments based on where your peers are doing better and worse than you.
CONTRACTS AND PROCUREMENT. Examine major customer contracts and procurement practices for compliance and opportunity to reduce cost and improve services.
Engineer Profitability
Take action based on insights gained from the investigation. Structure P&L reports to provide actionable product, service, project, and customer profit information. Create a 12-month BUDGET PROFIT MODEL that identifies and maps better ways to earn revenue and manage cost. Use the peer benchmark insights and prior year analysis to identify specific pricing, cost savings, and revenue acceleration opportunities. Ensure that your sales team is demonstrating value to customers rather than cutting price. With your P&L managers, compare actual results to the forecast every month to determine sales and operational adjustments as a leading indicator.
Growth Plans
Engineering profit consistently will drive results into the top percentile of your industry and provide clarity about your growth strategy. You will know when it’s time to hire the next team member, invest in capital equipment, and expand geographically or into new services/products. When done well, profit margins will increase as you grow your business due to economies of scale.
Outsourced CFO strategic financial management specialist accomplished this for Parks Systems, Inc. at a fraction of the cost of a full-time CFO.[/vc_column_text][/vc_column][/vc_row][vc_row type=”in_container” full_screen_row_position=”middle” scene_position=”center” text_color=”dark” text_align=”left” overlay_strength=”0.3″][vc_column column_padding=”no-extra-padding” column_padding_position=”all” background_color_opacity=”1″ background_hover_color_opacity=”1″ width=”1/1″ tablet_text_alignment=”default” phone_text_alignment=”default”][nectar_btn size=”large” button_style=”regular” button_color_2=”Accent-Color” color_override=”#007581″ icon_family=”none” url=”mailto:team@thehabitsofprofit.com” text=”Contact The Habits of Profitability™ Team” margin_top=”20″][/vc_column][/vc_row]