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Increasing Your Profit

(February 2013) posted on Tue Mar 12, 2013

Coudray explains how to use your Website to stand out from the competition and convert sales prospects into profit centers.

By Mark Coudray

Almost all of the business owners I know are on the perpetual search to increase profits. And why shouldn’t they? They’ve felt the pressure from declining profits for quite some time now. But when I ask how they plan on increasing their profits, the most common response is to cut expenses. I wince each time I hear this, because the answer isn’t really an answer at all.

Cost cutting is low-hanging fruit. Significant fat in the process is long gone. If some costs can still be reduced, the resulting gains are almost always short term, with the future consequences to be dealt with when they arise. Cost reduction comes with severe consequences to the foundation of the company. I’m thinking about labor cost reduction and elimination or deferral of maintenance to the equipment. Cost reduction to supplies and materials carries the risk of product inconsistency and unpredictable failure. The seeds you sow for future breakdown are usually far more costly than the gains.

The short-term view of how to increase profits is almost always tactical. It involves promotions, sales, and events. In short, the value delivered to your customer base is not really substantive and, most importantly, it usually can’t be repeated. It has to be replaced with some other gimmick pulled out of thin air. As an example, the retail market has the perpetual Going Out of Business or Everything Must Go sale.

Don’t get me wrong. There’s a place for this kind of activity, but it shouldn’t be the core of your plan to increase profits. Any profit gain from these kinds of sales is short lived, and you’ll work extremely hard to achieve it. You must sell and work harder to deliver the profit. Worse, you run the risk of cannibalizing your future revenue and profit stream with low-margin, artificially motivated tricks.

Fixing the funnel
The more prudent, but difficult, path is to think strategically. This involves looking deeper into your own organization and your customer base. Most of the owners I talk to say they have too many peaks and valleys or they can’t predict sales cycles or sales volume. Both of these realizations mean the sales funnel or pipeline is either broken or never existed in the first place.


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