Improving the profitability of your business is not something that happens overnight, but through small step changes and a clear plan of action.
We’ve already looked at the need for a ‘business health check’ before you start on your profit improvement inititative. And we’ve also explained some of the core ways you can improve your efficiency and end profits.
Now it’s time to start getting creative and putting some real thought and innovation into your future plans for the business – with profitability as your key goal.
Generate plenty of business ideas
After normalizing the numbers and getting to the bottom of your true profits, you’re going to see things you can change in the business to make it better.
Focus on ways to:
- Systemise your processes
- Automate the things that software can do for you
- Cut down costs and overheads
- Reduce the time spent on tasks
- Increase sales and bring in new clients
- Improve the customer experience.
And when you get to this point, it’s good practice to generate as many off-the-wall ideas as you can – and to capture every single idea (no matter how crazy)
Get the whole team involved in this ideation process. The more ideas you have, and the wider the range of people, the more likely it is that you’ll hit gold when panning the profit and efficiency waters.
You’ll end up with a list of ideas, some of which will stand up to scrutiny and some which will end up in the trash – but, crucially, you’re doing something proactive to change how the company works and to move towards a more efficient business.
Start, stop or keep?
A useful tool when reviewing your new ideas list is the ‘Start, Stop, Keep’ mantra. Take a look through your list and ask yourself:
- What positive things shall we start doing?
- What negative things shall we stop doing?
- What things shall we keep as they are?
It’s a practical way to quickly measure the value of your draft ideas and to focus in on the ones that look like they have positive worth for the future of the business.
It’s also helpful to look at the wider impacts on the business by carrying out a SWOT analysis of the company and the current market you’re trading in.
A SWOT analysis looks at four key areas:
- Strengths – the things that your business does well and where you have real ability as a company.
- Weaknesses – the areas where you’re not as strong and where there are potential holes in your capabilities.
- Opportunities – the prospects and openings that you’ve spotted in your core market or with your key target customer audience.
- Threats – the areas where you can see potential issues and problems in the market, or your ability to react to change etc.
Creating your SWOT analysis gives you a great overview of how the business is as a whole, but it’s also a highly effective way to generate more new ideas. If the whole team see a potential weakness in your systems, you can do something to resolve that weakness. Or if there’s a consensus on a particular opportunity, you can jump on it and seize that chance.
A leadership style based on cooperation
As the business leadership expert, Simon Sinek, explained in his now-famous TED talk ‘How great leaders inspire action‘, good leadership is all about inspiring cooperation, trust and change.
Involving the whole team in your change process from the beginning is fundamental to successfully creating improvements in the business. And having an understanding of why you do what you do – not what you do – is a large part of this.
Most small businesses have a concept that the only way to compete is to have the lowest price. But, in reality, it’s just as important to think about differentiating yourself in the market – knowing what your unique selling point (USP) is to your customers, and making your brand stand out from the herd.
Your USP is one of the biggest assets you have as a business, so working together as a team to strengthen and evolve your offering is all part of improving your sales, your customer growth and your end profits.
Choosing the ripest fruit from your idea crop
SO, you’ve brainstormed ideas, you’ve written a list and you’ve run these ideas through Start, Stop, Keep and SWOT analyses to sort the golden nuggets from the silt at the bottom of the pan.
What do you do next?
The next step is to narrow down the business ideas that you’re actually going to execute. And the easiest, and most effective way, to do this is with an impact execution analysis.
The aim is to measure two key elements of each idea on your list:
- Impact – what effect will it have on the business? (10 = a big impact and 1 = a low impact).
- Execute – how easy will it be to execute? (10 = very easy and 1 = very difficult).
For each idea, you give it an impact score and an execute score – rating both on a sliding scale from 1 to 10.
It’s a simple and quick way to see whether you have a genius idea on your hands, or a real stinker that’s going to hold you back, rather than push you forward – and it’s always better to know that well before you spend hours of wasted time on a bad idea.
For example, one idea may be to raise the price of your core product range. Raising prices will have a big impact (so it get’s a score of 10) and will help you to bring in more revenue and increase profits.
But if your core customers don’t have a good relationship with the business, they may not be happy to pay a higher price. So your execute score be a 1 or 2 – a hard execution to get right.
So impact on profits would be great, but execution would be hard. And that tells you you’ve got to do something to make this price rise easier!
Go through and do an impact and execution number for all 20 or so of your ideas and plot those onto a grid – with an impact on one axis and execution on the other axis.
By plotting your ideas in the way, and seeing which quadrant they fall into, you can quickly see where the low-hanging fruit lies – and where the rotten apples are.
It’s an incredibly valuable way to find the ripest fruit from your crop of new ideas. And when you can easily identify the most impactful ideas (with the easiest path to execution), you’re moving towards a more effective and profitable business.
If you want to improve your idea generation, please do come and talk to us – our Awesome 8 approach to profit improvement will help you find the right ideas, and execute them well.
Get in touch with your local Holden Moss office to book in a session with one of the team – we’d love to help you find the future direction of your business.
In the final part of this series we’ll ask ‘How do I know we’re making progress?’ and will highlight how you track and measure your change performance.