How to catapult your profits

How to catapult your profits

All children have been told that if they “look after the pennies, the pounds will look after themselves,” and this is just as true for a business.

You may think the only way to add 50% or even 100%+ to your profitability in the next three to six months is to increase your number of clients by the same percentage, but there are other ways.

With a few smart tweaks to the right numbers, you can significantly multiply your profitability and your drawings. I’m not talking about putting a few incremental percentage points on your bottom line, but generating a step-change in your business’s profitability. And it’s easier than you might think.

If April hasn’t been a good month for sales or profit, it isn’t down to something you did (or didn’t do) in April, but something you did or didn’t do three or four months ago – in December or January. That’s because there’s a very clear link in the sales process between your customer pipeline and the profit you will make in three or four months’ time.

And there’s a simple calculation that we use with our clients which will show you how to use the aggregation of marginal gains – the technique Dave Brailsford famously applied to help the GB cycling team dominate the second Olympics in a row in 2012 – to help you double (and more!) your profits.

This is a tried and tested method and has helped many of our clients deliver significantly higher profits and drawings within a few short months.

To benefit from the power of the penny, you need to know your numbers. In my experience, many business owners find this difficult though and it’s quite common for owners not to know their numbers at all, or to be measuring the wrong things.

Let me ask you:

  • Do you know how many high quality leads you get each month?
  • Do you know what your conversion ratio is?
  • What is the average income of each of your clients?
  • How profitable is each client?
  • What does it cost to run your business?

If you don’t know the answer to every one of these questions – and keep track of them at least weekly – you will not know where to focus your efforts to grow. You will also have a lot of missed opportunity.

The equation

Three of the elements of the equation are customers, revenue, and profit. It’s these three elements that most businesses I come across are measuring – if they’re measuring anything. The problem is that these are KPIs (key performance indicators), which look backwards, so you don’t know the outcome of the KPI until the period is complete. So as of 1st May, you can’t influence the number of customers, income or profit you had in April.

At Tendo, I work with clients to understand what their Business Growth Indicators (BGIs) are. These are the measures that can impact the number of customers, the amount of revenue and the value of profitability; they’re forward-looking metrics.

Once we’ve agreed what these BGIs are, we can predict their outcome. And, by making small changes, the multiplication effect gives you a significant increase in profitability. And that’s the power of the penny. We have helped clients double their profit within a month and quadruple within three months.

Imagine taking very small steps to achieve a massive impact very quickly. Imagine doing that every month, every quarter and every year. Then where will your profitability be? Perhaps you will finally be able to take the drawings you need for the lifestyle that you desire.

The catch

You can only effectively influence those key numbers by having a good growth strategy in place across all areas of your business. You need a set of key actions that influence the results you achieve in the next month and the next quarter, which will allow you to increase your customers, revenue, and profitability significantly.

Strategies, key actions and BGIs are a key part of a business plan that allow you to have focus and clarity on your next steps, and catapult your profits.

Do you have a lengthy business plan and never look at it or maybe you have no plan at all? Many business owners don’t manage their company strategically, know what to focus on or measure daily, to have complete clarity and control.

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