Let's Talk About Profit

“I don’t want to do business with those who don’t make a profit, because they can’t give the best service.” – Richard Bach, American Author

Profit is the oxygen of any business. If your business is not making profit, you have a hobby, not a business. We all go into business for a reason, and if you want to fulfill your purpose for having a business, your business must be profitable. Profit is what allows a company to expand and stay viable. Profit allows the company to contribute back to the community, to research better ways of doing things, to explore and experiment in ways that benefit us all.

How do you know if your business if profitable or not? Successful business owners know that they have to regularly monitor several key profit measurements if they want to know how well the business is performing. Too often, business owners don’t take the time to study profit indicators. They figure that if the accountant is still able to write checks, they are still in business. They don’t have time to look at the math and determine what is and isn’t working.

When you’re not on top of your profit numbers, you are likely missing opportunities to increase your profit. Many businesses can increase profit substantially just by making a few quick changes to the systems they have in place. And in this economy, no one should be leaving profit on the table if it’s right there for the taking.

Profit margins and ratios provide a comprehensive and current snapshot of the company’s bottom line. They quickly point to bottlenecks in your production system and what part of the business is costing more than it should. Every company should have profit targets they work toward and periodic reviews to see how close or far they are from those targets.

Profit margins, such as gross profit and net profit, show the company’s ability to turn sales into profit. The business does a certain amount of sales and generates a certain amount of revenue. How much of that revenue falls through to the bottom line is an indication of how well the company is being run.

Return ratios determine the company’s overall efficiency. Efficient companies keep cost of goods and operating expenses under control, allowing them to convert more revenue into profit.

Companies should also evaluate customer profitability. Do you have some high maintenance clients that cost you more than you make on them? Monitoring customer profitability allows companies to better define who their ideal clients are and how to effectively and profitably manage them.

Next week, we’ll dig into the math and calculate some actual profit margins and explain what they mean to a company’s success. In the meantime, consider how well your business monitors profit. Are you confident that you are meeting your targets? Or are you just guessing at your bottom line? If you want your business to win, you’ve got to know how to keep score.

Are you ready to win?

Delivery System Follow Through

“Do what you do so well that they will want to see it again and bring their friends.” – Walt Disney

We’ve been focusing the last few blogs on delivery systems. How does your company get your product to the customer quickly, profitably, and with a high level of quality? Getting the product out the door is, of course, one of the most important aspects of doing business. But what about follow up? What happens after the product has been delivered?


All too often, companies move on to the next delivery without seeing the process through and insuring that customer expectations have been met. Failure to implement post-delivery protocols can easily result in dissatisfied and confused customers who don’t know where to turn for help.


Here are some keys to managing your deliveries beyond the hand-off to the customer. Remember, when we talk about deliveries, we’re talking about any product, service, or project that your company sells.


Responsibility – Who on your team is responsible for the product after the customer receives it? Is it the salesperson? Customer service? The production team? It’s important to clarify who the customer should have as a point person for any questions or concerns they have once the product is in their hands.


Follow Up – Do you have a plan in place for following up with the customer? If not, you risk not knowing if the product made it to them at all, if they are happy with it, or what you can do to fix any problems with the order. A simple system for following up with a phone call or appointment can greatly improve the customer experience and help you to avoid unnecessary upsets. Follow up calls can also be an opportunity to upsell the customer with complimentary services.

Returns – What is your return policy? Is it clear and easy for the customer to understand? Does the customer know who to contact or how soon he must voice a complaint? Does your policy allow for enough customer leeway in getting what they want? Too much leeway? How does your return policy affect your product profitability?


Re-Orders – If you sell a product that customers need to purchase repetitively, do you make the re-order process clear and easy to understand? Is someone at your company responsible for following up and asking for re-orders? Do you offer incentives for customers who want to re-order within a certain amount of time or at a certain volume?


What’s Working?/What Isn’t? – Ultimately, the key to any delivery system’s success is oversight. Management must consistently review what’s working and what isn’t. From the customer’s standpoint, the delivery of your product or service should be effortless. A good customer experience is essential if you want to retain clients and obtain new ones. Your delivery system should not allow for repeated bottlenecks, errors or breakdowns. Consistent monitoring of your system will insure that problems can be addressed quickly and efficiently, making the customer feel like a winner for having done business with you.


Always remember that your client relationship doesn’t stop when the product reaches their front door. Developing a strategy for leveraging off a job well done will result in happier customers, more orders and an excellent reputation in the marketplace. And that’s a great way to win the game of business.


Are you ready to win?

Delivery System Quality

“Quality in a service or product is not what you put into it. It is what the client or customer gets out of it.” – Peter F. Drucker, Renowned Management Expert

We’ve been focusing this blog series on delivery systems – how your company gets your product or service to the customer. A good delivery system will be efficient and have the appropriate amount of capacity to handle your production needs. But what about quality? It doesn’t matter if you have the most efficient and cost-effective system on the planet. If you are delivering an inferior product or something that doesn’t meet the customer’s expectations, you will quickly lose sales, as well as your reputation.

If you haven’t analyzed your delivery system from a quality control standpoint, you should. Here are some things to evaluate and consider:

What is Your Commitment to Quality? – If you want to deliver a quality product, you have to be committed to doing just that. Does your company have a clear vision of how you define quality? Are management and staff aligned on that vision? Do they define quality the same way? Take the time to create a mission statement for quality in your production system.

Who Is Responsible for Quality? – The responsibility for quality should be shouldered by everyone in the company. That being said, the customer should have a point person to call whenever there are questions about products or services they’ve received. Don’t ever make the customer call every department in your shop trying to figure out who can “make it right.” Do they call their sales rep? Do they have an account manager? Make sure the lines of communication are well-established within your production system.

What Quality Control Measures Do You Have in Place? – You do have some, don’t you? In short, how does your production and delivery team know if they are producing the product correctly and to the customer’s specifications? Are there checks at several points on the production line? Have these quality specifications been clearly communicated to the production team? Do they have any input or ideas on how to improve quality?

Are They Sufficient? – You should have a clear target of what percentage of errors you are willing to allow for in your production line. Each person on the line should be well aware of what they need to do to meet those performance measurements. If you have Quality Control measures in place, but you are still delivering products that are underwhelming your clients, you may need to add more quality control checks to the delivery system. Assess what your system currently allows for. Late delivery? Insufficient packaging? Incomplete orders? Find out where you need to tighten controls and set performance targets for your team in those areas.

How Do You Handle Breakdowns in Quality? – Do you involve the whole team and look for a better way to make the product? Do you assess where the bottleneck or breakdown occurred and make changes to improve the process? Who manages these breakdowns with the customer? Does the customer feel as though they are getting good customer service, even when something goes wrong? How much are these breakdowns costing you?

It’s important to remember that delivery systems aren’t just for companies producing widgets. Service providers need to consistently monitor quality if they want to deliver quality consulting or creative services. Even if you aren’t producing a physical product, you are delivering a project or service that needs to meet your client’s expectations. Quality goes a long way toward good word of mouth and repeat business and can be the difference between winning and losing in the customer’s eyes.

Are you ready to win?