November 29, 2017

Increase Your Bottom Line Even in a Volatile Environment – Go Back to Basics

Denise Stone

Denise Stone
Co-Founder & Chief Financial Officer/Tracker Group

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Many companies have recently experienced a significant reduction in sales and reacted by cutting costs and right-sizing their P&L; however, the cutbacks have left many businesses in a less than favorable situation. How do you bring your business back into balance after change and restructuring without limiting your ability to grow?  The answer is to optimize the key fundamentals of your business that allow you to increase your bottom line.

The most effective and impactful place to start improving your bottom line is higher on the income statement: begin with a healthy gross profit margin. Improving gross margin requires smart decision making about your products or services and starts with understanding what your customers want and need and how to reach them on an emotional level. These insights, along with pricing and cost decisions, are the keys to becoming and staying profitable. 

What should you be aiming for in terms of gross margin? This varies across industries but at the most basic level, your gross margin should be sufficient to cover all operating expenses while allowing the business to realize the desired amount of bottom line or net income consistent or better than industry peers.

Below are key suggestions to increase your gross margin:

    • Monitor cash flow.Cash flow projections are essential to successfully manage your business.
    • Develop business dashboard reports. Know the drivers of your business and watch them.
    • Evaluate your pricing structure. Have you incorporated all aspects or just product cost?
    • Recalculate your overhead rate. Recent cutbacks may make you more competitive.
    • Re-negotiate price and terms with your suppliers. Better price equals greater margin.
    • Build in controls to safeguard your assets and minimize risk. Don't assume it can't happen to you!
    • Consider outsourcing. Outsource financial services, brand re-imagination or marketing and web design for significant savings and the flexibility to adapt to change without long-term obligations.
    • Consult with a professional. Learn to operate more efficiently and implement savvy management tools to increase your profitability.

Sound business fundamentals are not only cost-focused; they are customer-focused as well. Successful companies are taking advantage of this economy to grow their business and expand market share. Now that you have improved your cost fundamentals, grow your top line. Identify your target market, know your customer, differentiate yourself and aggressively go after new business.

Below are key suggestions to enhance your sales strategy:

    • Understand market trends and get to know your customers at a more intimate level. Know what they want and need and determine the best way to connect with them.
    • Differentiate yourself and know your competitive advantage.
    • Build your brand and stay relevant to your target market.
    • Focus on building your market share in your targeted growth areas where you are most profitable and can win new business.
    • Identify your target market and proactively know your customer needs.
    • Determine profitability by customer and by item to assist in decision making. 
    • Work with a professional that can assist you in (1) Uncovering opportunities to increase gross margin through in-depth customer analytics and data analysis;(2) Reviewing of trends and buying habits in your industry to substantially increase your market share and profitability.

Comments? You can contact me directly via my AdvisoryCloud profile.

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