Jonathan Nicholls, 2016

1. Making your business more
profitable
June 2016

2. 30 June, 2016Managing your business Growth 2
What is profit?
Sales income less costs
Debtors (Receivables) Stock & WIP
Customer prepayments Creditors (payables)
Unbilled work Accruals
Prepayments

3. Critical
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4. Tip 1 Manage your debtors
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Critical

5. Tip 2 Minimise WIP and invoice often
• Have a contract
• agree changes to scope
• Create stages and sign off points.
• Get bit of work formally signed off
• Invoice promptly
• No surprises
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Critical

6. Tip 3 Ensure you have a workable business model
• Can make enough money for you and your business
• Sense check
• financial model
• Better to fail fast and move on if not working
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7. Operational
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8. 30 June, 2016Managing your business Growth 8
What is profit?
Sales income less costs

9. Tip 4 Maximise sales
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Operational
Traffic/ # Prospects
X
Conversion Rate
X
Average Transaction Value
X
Purchase Frequency
=
Sales

10. Tip 5 Make sales more profitable
Business you can afford to lose if
increase price
How much more you have to sell if you
discount
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Operational

11. Tip 6 Reduce bought in costs
• Rank purchases – by supplier, by type of product – by spend
• Focus on larger or ones easiest to get savings
• Benchmark (ensure like for like comparison)
• Discuss with supplier “what can I do to get a better price?”
• Reduce costs for them
• Order size – what are the break points
• Terms
• Consolidation of buying
• Different specification – remove features that don’t work for you
• look at the competition
• negotiate
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Operational

12. Tip 7 Manage people costs
• Look at utilisation rate and recovery rate – track time
• Recognise that you also have a cost
• Allocate full cost to projects/customers/products
• Flexibility to cope with peaks and troughs – associates, flexitime,
partners, agencies
• Scheduling
• Don’t forget about selling, admin and management costs
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Operational

13. Strategic
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14. Tip 8 Have good information
• use a good system eg Xero, QBO
• make sure you can trust the data you are getting
• make sure data is captured in a meaningful & consistent way.
• Be able to cut by project, customer, product, etc
• Aim for “real time information” - the shorter the time between something
happening and you knowing about it the better
• Make sure it is internally consistent and reconciles
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15. Tip 9 Understand where you make money
Customer (or channel)/Product (or
service) profitability
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Cumulative profitability graph

16. Tip 10 Have a goal
and a plan
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17. Tip 11 Focus
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Strategic

18. Tip 12 – build in feedback loops
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Strategy
Plan
Do
Results
Data
Analysis
Insight

19. Summary
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Critical
• Working capital management – debtors
• WIP and Billing
• (Financial model)
Operational
• Increase sales
• sell at right price
• reduce costs (bought in and people)
Strategic
• Have good information
• Know where you are making money
• Have a goal and a plan
• Focus
• Track progress