And now for Part 2 of Boost Your Profits! 7 Key Places Small Business Owners Need to Measure to Boost Profits
#1. Measure your closing ratio and average order.
Boost your closing ratio and you will boost your profits. Closing ratio should be measured in relation to the number of people who came in the door to sample your product or service or in relation to the number of estimates you delivered to prospective customers. Both numbers are vital in making your forecast calculations. Remember that performance measured is performance gained.
#2. Measure net profits in each of your product or service offerings.
As a business you’re not just selling only one thing. You might sell one core service, but you offer it is many different ways and at different price points. But, many small business owners look at their revenues in one lump as the annual total. Instead, what you should do is run separate P & L’s (profit and loss statements) for each of your offerings.
If your company sells 4 main services you should know how they rank in terms of margins, not just in terms of the total sales volume they equaled together. You want to understand what your total net profits are as a diversified portfolio that represents all your program, product or service offerings. It’s harder to boost profits in broad strokes. Get specific on each service you offer. Remember that performance measured is performance gained.
#3. Measure your cash flow statement weekly.
It is important that you know the financial snapshot of your business on a weekly basis, particularly if cash flow is already uncomfortably tight. That means you need to have a reliable bookkeeper who can stay on top of invoicing, bills and reports. Your bookkeeper also needs to be readily accessible, so you can get your information in a timely manner. Remember that performance measured is performance gained.
#4. Measure your staff productivity.
Ok, if your response to this final step is “I don’t have any staff” then let me be blunt by saying doing everything in your business yourself is the slowest way to boost profits. If you’re a solopreneur and you don’t want the payroll expenses of hiring your first employee, start by outsourcing to a virtual assistant even 5-10 hours a week.
Whether you choose to hire employees or part time freelancers (contractors) have a system that measures their productivity. This is for you to be able to get a quick snapshot where you can see:
- how long it takes them to complete certain types of tasks
- the outcome result they accomplish and
- the value those results bring to boosting your profits.
You could have someone at $20 an hour who takes 20 hours to complete a task or you could have someone else who is paid $40 an hour who can deliver the project in two hours. By measuring staff productivity you will find that cheaper doesn’t always mean cost-effective.
In closing, if measuring these 7 areas in your business is new to you, it’s not as hard to do as you think. It’s like anything else. The more you do something the easier it becomes. Then, these success habits become as automatic and subconscious as breathing. But, nothing will change if you don’t start taking action.
ACTION STEP: Set yourself up for success by scheduling a meeting with yourself in your calendar RIGHT NOW for you to work “on your business” instead of just “in your business.” Start by scheduling a 30 min meeting once a week and mark it “review 7 measurements”.
QUESTION: What is the one biggest block that keeps you from measuring in your business? Please share your comments and questions below.
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