by Asa Beavers
What key economic ratio do you use to measure your business' economic success? If you could pick one, and only one ratio, such as profit per X or cash flow per X, to systematically increase over time, what X would have the greatest and most sustainable impact on your economic engine? Is it profit per customer, per product or service, per employee? Which X, by focusing on it and improving the ratio over time, would provide the highest and most sustainable economic growth?
For example:
Profit per customer. Here, you are looking to increase the number of transactions by each customer. How can you get your customers to come back repeatedly and buy high-margin products? What main products can you sell that support highly profitable consumable accessories?
Profit per product service. You can increase profit margins here by reducing the cost of providing your products/services by negotiating better deals with suppliers, reducing production costs, utilizing technology, and increasing production efficiencies. Or you can increase profit margins by increasing the efficiency of delivery and distribution, creating a more disciplined, self-motivated and productive team, and improving your business systems to eliminate slack.
Profit per employee. How can you run the most cost-effective team? You need to hire the right people, for the right positions, with the right level of self-motivation to drive the business. Take your time filling the higher positions with the right people, and then establish great systems to support them. Your high-caliber team will then take care of the rest of the business.
Go ahead and pick one - just one. Then measure it and focus on ways you can increase its ratio over the next six months.
About the Author
Asa Beavers is a small business coach and consultant. He shares tips, techniques and strategies with smalll business owners to boost clarity and focus, create strategic action plans, and increase sales and profits. Visit his website at www.redlinebsg.com, email Asa at asa@redlinebsg.com, or call 919-367-0790.