I apologize for not posting last week. I had some things going on and I probably should have created and scheduled the posts. But unlike many business blogs, I write all of my content myself. There is nobody out there posting things for me. I write every word.
This week I want to talk about Money and Time but I need to start bringing in some financials to show why this is so important. Productivity must go up every year. What is productivity? It is all about the amount of Revenue that you bring in with a specific number of employees. That is why I talked last time about Revenue per Employee. Well, one of the challenges is inflation. There are inflationary pressures on businesses in Operating Expenses. This included Insurance, Utilities, Rent, and Salaries. Salaries themselves lead to other expenses, like increased Workers Compensation as your payroll increases. When I was at AFC, our best estimate was that costs were likely to go up about 7% a year. You can do your own studies of your own business and I think you will be surprised. But for this post, let me assume an annual cost increase of 5%.
Now if you have a 50% Gross Margin to get an additional 5% Gross Margin you would need to have a Revenue increase of 10% and that is just to stay flat in profit. Now as a business owner, your profit is what drives the value of your company and your compensation. So, think about it. Without doing a lot of math or thinking very hard, we are saying that you should expect to have 10% more revenue year over year and do it without adding any employees.
The best way to accomplish this is to be very efficient in your capturing customers and those customers that provide maximum value to your company. This is why every Sales and Marketing Consultant wants to know your Target Market and your Ideal Customer. These should be slam dunks for you. That is the idea here. Your Ideal Client would be making a mistake by purchasing from a competitor. Your solution should be optimal for this group. Once you are past this focus, then we can start talking about Automation and Business Process Improvement. Those are the steps that in the middle term will be driving productivity improvements. In the long term, it is all about people. And we will get there.
So if you are a really busy business owner, how often do you step back and think about your business and how it operates? Probably not very often. You can see how this will become a bottleneck in your business in the future and we will be talking about this as we go forward.
Have a great day!
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