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Plan to improve your profitability
THE follow-on to the adage 'what you
measure you can manage' is 'what gets
managed gets done'.
When it comes to achieving greater
profitability there are no truer words,
according to Andrew Graham from
accounting firm RSM Bird Cameron.
"One way of growing a business - which is
essentially improving the effectiveness of
the things that you do - is assisting you to
better manage the results," he said.
"We often talk about the importance of
focusing your profit improvement strategies
into some key areas including increasing
the number of desirable customers; the
number of times each customer makes a
purchase; and the average amount they
spend on each purchase.
"These are the major areas that can be
managed by measuring their impact on
overall profits and the good news is they
"At the end of the day, a profit
improvement plan is only effective if
your return on investment , your net
profit margin and your bank balance
are improved simultaneously," he said.
"Constant review and management of your
CSFs is the key to sustainable profit and
return on investment over the long term."
can be measured with relative ease by
identifying your critical success factors
(CSFs)," Mr Graham said.
These can be determined by the answers
to the following questions:-
1. What are your most profitable
products/customers and what makes
them so profitable?
2. What resources are required to
support your business?
3. What are the things that keep your
customers coming back,
recommending you and paying a good
price for your product or service?
"Once these questions are answered you
should then plan on how you can monitor
the effectiveness," Mr Graham said. "This
can be done by recognising your key
performance indicators and placing more
or less emphasis on each area depending
on the trend.
Andrew Graham has landed a national job with RSM Bird
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