In a tough economy, making a profit is hard. Maintaining profit is even harder. But doubling and tripling it is a whole other ball game.
It’s not all about the money, but without money you cannot realise any of the dreams that you have for your business. You have to first make money before you can start changing lives.
We have managed to more than triple our bottom line profit from the previous year. Our team is now applying the keys and practices that enabled this growth to our clients’ companies with similar success.
I would like to share five of the most important learnings with you:
1. Focus on a specialised niche
People are willing to pay more for specialised skills than for generalists. Select a profitable niche and ensure that you are an absolute expert in the area of business you work in. Know your market and your focus area within the market.
Be at the cutting end of trends and technology within your niche and make sure that you have what it takes to serve them well. Identifying your perfect profitable niche requires both an inward and outward focus.
First, look inwards. What are your passions, purpose, natural talents, knowledge and experience. Think about what has been placed in your heart and decide what your personal message is. It’s important to position yourself to do something that you love.
Running a business will always include challenges and tribulation, but doing what you love and what you were made for will help you to persevere.
Secondly, look outwards. Focusing on what you love will only convert into profit if it’s something that sells. Health, wealth and success. Beauty, relationships and sex. Personal development and spirituality. Relationships and happiness. Technology and innovation. Make sure that your niche is something that has a definite market.
Then drill down to find that ‘inch wide and mile deep’ part of the market that you want to speak to. Instead of being just another law firm, if your passion is entrepreneurship and technology, be a law firm that specialises in tech start-ups using the latest technologies to service them.
2. Brand eminence
A hard process of cost cutting is required to grow profit without growing top line revenue. Growing profit is a lot more achievable when revenue growth is high. Establishing yourself as a thought leader in your industry goes a long way towards building your brand and ensuring that new business seeks you out.
Make sure that the differentiating factors of your offering have some superiority over those of the competition and that this fact is made visible. Your brand must command eminence. Being seen in such a light drastically changes what foot you start on when negotiating with a new client as well. Drive new business to fuel top line growth through an established, visible brand.
Writing good content for press distribution, taking up sensible invitations to speak at industry conferences and events, ensuring positive social media engagement and streamlining all of your communication material are all low cost ways in which to start adding bulk to your brand.
Once you are established within your industry and seen as a leader in your niche, work should be flowing in. Now the secret is not to be overwhelmed. Biting off more than you can chew could lead to non-delivery on those big promises that you and your brand have made. Delivery as promised will be required to turn once-off projects into long term, retainer clients.
Working harder and longer is not sustainable. New staff cannot always be found, trained and equipped fast enough. What you need is systems. Some work will always require your personal touch, but a large portion of work and business processes can be automated.
Yes, material hours will go into developing systems and processes. Hours that are not billable. But these sacrifices ensure that you can handle volume as your business scales. Good systems ensure that nothing falls through the cracks and that your delivery is on time and up to standard. Over time, it also enables you to perform tasks faster, which increases profit margins.
Work flow, client relations management and financial reporting are three of the first areas that you need to automate. Planning workflow and keeping track of billings can be done well using an online tool like Harvest. Managing leads and saving client information can be done for free using online CRM systems like Zoho.
Bank transactions can automatically be drawn into cloud accounting packages like Xero, making month-end reporting and live financial records possible. There are amazing automation tools out there to suit almost all business processes.
4. Cash flow management
The age old concept that cash flow is king applies. Managing cash in and cash out well is a big management challenge. When sales are soaring and new contracts are coming in, careful planning is needed to ensure that short-term obligations can be met.
Accounting profit is not cash flow profit and ignorance on this topic could cost a fast-growing company the ultimate price. Be sure to build enough detail into your cash flow model to be able to effectively plan and manage the lifeblood of the business.
Start with cash in the bank at the beginning of the period (normally a month, could be a week) you are analysing. Add all expected cash inflows for that period, taking careful note of when debtors are expected to pay. Subtract all expenses that you know will need to be paid in that period.
Make sure that all repeated transactions (like rent, telephone bills, salaries) are kept in mind for each month. Also remember to prepare for the payment of all non-standard items (like that annual licence renewal or the new asset purchase due).
The end result of this sum would be your cash balance at the end of the period. If you make use of more than one bank account, be sure to add the cash movement in each of them to your calculation.
Having all of these figures plotted out for a period like a month shows you very well where your cash is coming from, where it is going and what you have left to work with.
It is far more valuable to monitor than just to look at the profit and loss for the month. As the saying goes — turnover is vanity, profit is reality, cash flow is sanity.
5. Expand revenue streams and profit centres
Once work-flow is automated and cash flows are being controlled well, your success should be reflected in your bottom line. The final step is to diversify your streams of revenue.
Explore various other avenues of revenue generation within your area of expertise and within your niche. For each new revenue stream, follow the same process of establishing eminence, engineering automation and monitoring and managing cash flows. You already have the recipe — now rinse and repeat.
The easiest way to establish a new revenue stream is to look at your existing client base and to ask — what else do they need that I am not yet supplying? If you’re a Software-as-a Service provider offering a solution to the finance industry, you might not consider offering ready-made meals to your client pool next.
Related: How Smart Managers Drive Profits
Adding a consulting arm to your solution that you also offer to your existing clients, or adding a new functionality that solves a different problem could however be good for business.
Applying these learnings to your business with persistence will ensure an uptick in profit. Patiently think them over and incorporate them in your company to ensure that critical bottom line success.
Leon Meyer GM At Westin Cape Town Shares 4 Experience-Driven Tips On How To Keep Your Team Productive
Productivity is a fundamental requirement for an organisation – it’s the seed that builds a business and contributes to higher profit margins.
Productivity is a fundamental requirement for an organisation – it’s the seed that builds a business and contributes to higher profit margins. But what’s the best way to ensure employees remain productive, and happy in their day job?
The answer is simple and highly effective and I choose to sum it up with three short phrases – respect, trust and teamwork.
In partnership with my management team, which consists of about eight staffers across various disciplines, we strive to tick these boxes.
In total we’re ultimately responsible for managing roughly 500 employees.
Five hundred employees across several departments is a mighty job. But with teamwork, good listening skills and the right attitude from the top to filter down, any business can run like a well-oiled machine.
I’d like share with you the essentials for building and maintaining a productive workforce, and these apply to all industries, not just the hospitality sector:
1. What’s your definition of a productive team and how do you achieve that?
We need to keep in mind that productivity is a result, one that CEOs and managing directors strive for with their teams. But what happens beforehand in order to achieve that result determines whether it will be achieved at all, and is equally important. I suggest the following to ensure a productive team:
Define roles and responsibilities: Direction is incredibly important; everyone needs to know exactly where they’re going and how they need to get there, so KPIs are essential.
Often when roles and responsibilities are unclear, things go pear-shaped. I am an advocate for setting clear KPIs, it’s a good way to steer us in the right direction, and in turn helps to grow the business and the individual in his/her role.
Be flexible: Rigid environments are the worst kind, allow your employees some flexibility and the opportunity to be themselves in the workplace. We spend so much of our time at work, we need to be ourselves there.
Celebrate the team: When there are achievements, celebrate them, single out individuals who are excelling and living the company values. This builds morale and is indicative of appreciation, which is fundamental when running and building a business.
2. What has and continues to be your philosophy since managing a large team?
Know your strengths and weaknesses, as well as your team’s and leverage off that. Be prepared to learn from others, no one can operate in isolation, regardless of the level on which you operate. Accept criticism and don’t bulldoze someone’s ideas, that’s how you build trust.
3. What in your view are the top characteristics the team look for in a leader?
- Be consistent – inconsistency screams bad leader
- Provide guidance – this is key, don’t turn a blind eye, give input and council
- Listen – always listen intently
- Be impartial – always be fair
- Give credit – it builds morale and shows you recognise good work
- Be patient – Rome wasn’t built in a day, and remember not everyone thinks the same as you do
4. What’s your view on an open door policy and how does it assist with managing a team and ensuring everyone remains productive?
I believe in an open door policy. It’s essential to build and develop trust. I’m the first to admit that it takes a while to build that trust, but once the team (on all levels in all departments) know your door is always open, and that they can trust you implicitly, half the battle has been won.
I host a GM’s roundtable every two months, just to establish how everyone is feeling and where everyone is at. It gives staff the opportunity to bring their challenges to the table, and I deal with them the best I can.
It’s 100 percent confidential and line managers are not allowed to attend. During this meeting we try reach common ground, and I commit to addressing and ultimately solving the problem(s).
Why Purpose Drives Profits
If you want to succeed, it’s time to start engaging where it matters.
Over the past two years, many clients have been extending brand positioning exercises into purpose-driven expressions.
When we look at it, it makes sense given the country’s demographics. With many of our fellow countrymen struggling to make ends meet, brands have stepped in to provide them with a picture of a future worth striving for.
Global customer-centricity study, Insights 2020, led by research firm Kantar Millward Brown, has attempted to understand how brands could drive customer-centric growth as well as the factors that really make a difference. The research surveyed 10 495 individuals in 60 countries, and there are some significant efforts worth investing in if brands want to engage where it matters most, in consumers’ hearts.
The research uncovered that for market-leading companies and brands, traditional value drivers such as quality, packaging, or distribution are necessary, but no longer provide a competitive advantage; most brands are capable of providing these drivers. What is important, are a few critical approaches.
1. Purpose-led brands
The study found that when companies or brands linked to a purpose, 80% of them outperformed the market. Only 32% of non-purpose led brands managed to perform better than the market.
Related: How To Calculate Gross Profit
2. On the ground
It’s important to engage with consumers in their space and on their terms. Through the use of memorable campaigns, experiential events and activations it is critical to engage with consumers on their turf.
3. Be truthful and authentic
Consumers can smell something inauthentic a mile away, especially when it’s coming from a brand. This forces brands to strive for authenticity in everything they do, especially when it comes to marketing. Building values and principle-based attributes into your brand as a guiding tool is essential.
4. Helping consumers commit
By allowing individuals to attach themselves to a brand with a purpose, it helps consumers personally commit to a cause that they consider important. When a consumer is personally invested, the link between the brand and product or service deepens.
5. Balancing heritage and modern relevance
There is a continuous tussle in balancing the traditional market, transitional market and the new consumers brands are trying to attract. Keeping the heritage and roots of the brand true to itself, while creating relevance for the new market, is a battle marketers are still fighting.
Need To Trim The Fat To Boost Profitability? Listen To Your Clients First
Jeff Bezos believed that once you win the client over by doing this, everything else will follow – not least profitability.
Finding the balance between offering the extras that set you apart from your competitors and keeping things ‘lean and mean’ to minimise wastage and maximise return on investment is a tricky balancing act.
I’ve noticed that many businesses try to attract or retain customers by offering what they think their customers want, rather than finding out what they really need, and then delivering that. That’s an expensive mistake to make – and it’s not going to achieve the business results you need.
I’ve also observed that now is the age of the new entrepreneur – the game changers who disrupt the status quo long set by big bureaucratic competitors who think that their customers will just accept an inflationary (or slightly larger) increase every year, just because they always have.
While Amazon has been around for a while now, there’s also an important lesson to be learned from its launch goal, which was to bring the price to the client. Jeff Bezos believed that once you win the client over by doing this, everything else will follow – not least profitability.
How have I applied these lessons in my business?
Firstly, we design our hotels backwards – we focus on the needs of our clients, very aware that what hotel guests wanted years ago is not what they want now. That’s why we don’t offer thing like a turn-down service with chocolates on the pillow. Nobody eats the chocolates, and nobody uses the toiletries – so why should we include the costs of these unwanted extras (and the cost of the staff required to implement them) in the final bill to our clients?
We do, however, offer free WiFi internet connectivity, free parking in our buildings, free laundry services and either bed-and-breakfast options or self-catering rooms.
Simply put, we’ve cut the fat that nobody wants anyway, and added the value that our guests have said they expect.
Our clients have said that they expect the whole hotel to be a workstation, and not just the business centre in a dark, unwanted corner. So, we’ve put a workstation in every room, with always-on access to the internet. Our hotels are designed with beautiful work spaces that cater for nomadic entrepreneurs and double up as comfortable meeting spaces, again – gone are days of boardroom only meetings, our spaces are primed for work and play in one integrated space.
Our clients have pointed out that they’re already paying for their room – so why should they pay for parking?
Many of our clients stay with us for days or weeks at a time, and have said it would be helpful if we did their laundry. So, we do that for them – and we don’t charge them for it.
It’s true that many of our old-school competitors offer a broader range of products and services than we do, but we’ve built a successful business on adding the value that our clients need, removing the costs and extras that annoy them, and keeping costs (theirs as well as ours) under control by cutting out unnecessary frills.
It’s an approach that’s worked for The Capital Hotels and Apartments as a disruptor in the hotel and long-stay accommodation industry, and I’m confident that its principles would apply to any other industry that’s ripe for disruption.
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