March 25, 2010
Build Your Business
Focus on Profitability
Profits don’t just happen by themselves.
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Achieving and sustaining profitability is a major theme for Tom Shay of Profits+Plus.
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The word “profit” comes from Latin, and it essentially means to “make progress.” And that’s precisely what profit does for your business: it keeps it running and allows you to move forward. There will be leaner and fatter years, but you must focus on profitability if your business is going to survive, and then to thrive.
Achieving and sustaining profitability is a major theme for Tom Shay of Profits+Plus; his website, www.profitsplus.org, contains information, advice, and numerous free downloadable tools to help maximize return. His site covers all aspects of retail, but whether you’re selling tires, toothbrushes or toasters, the principles are the same. Some of his suggestions include:
Learn the financial side
Certainly you have an accountant, but he or she is working with your money. Understanding what your money is doing can be fundamental to operating your business profitably—especially since your accountant undoubtedly won’t be as knowledgeable about the tire industry as you are. Shay suggests that if you’re not familiar with it, consider enrolling in a basic accounting class at a local college: it can help you make better decisions, and you’ll know what questions to ask your accountant.
Be aggressive with marketing
Shay suggests creating a 12-month marketing plan. If you run advertisements, it will avoid last-minute decisions, and will give you the opportunity to negotiate contracts with your media outlets, which can save you substantially over the cost of individual ads placed at random times. Keep an eye on your competitors, too: where do they advertise, and what days do they usually run? You might not want their names to be the only ones people see when they pick up the paper.
Be aggressive with your database marketing, and use your computer programs to their full potential. It’s wasteful to send blanket letters to customers who have just had their fall maintenance done. Instead, use your database to identify those who need a reminder to come in.
Ask customers what they think
Customer surveys will give you an idea of how your clients view your business. Ask them why they come to you, where else they go, and what they’d like to see in your shop. Make it short: any more than four or five questions, and they’ll lose interest. Ask what you can do to improve your business for them.
Hold semi-annual job reviews
Raises should be given on merit, not on longevity, Shay says. Your employees should have job descriptions, which will allow you to set goals; the employee would then be working to meet these goals, knowing there will be a pay evaluation in six months.
Keep your employees informed
They don’t have to see the books, but they should have a good idea of how the business is functioning financially. This will help them understand how small changes can affect profitability and stability. Shay says that most also think their employers are making more money than they really are, which can lead to expectations of sizeable raises at any time.
Use cash flow plans
Shay’s website contains several tools that will help you track and understand your cash flow. Keeping tabs will help minimize the effect of problems and point out opportunities for growth. You can’t run your business profitably if you only check your progress when the accountant balances the books. You should know what it costs to run your shop on a daily basis, and every day, you should know if you met that number. Profitability doesn’t just happen at year-end. It’s an ongoing process that’s worth the time and trouble it takes.
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Jil McIntosh