Profit is the positive financial gain your business makes after you’ve subtracted all your expenses. 

The ability to generate profit is crucial to the survival of your business. It’s about more than just making money. It’s about the ability to grow your business in the future.

Take a look at news I spotted about Taylor Wimpey posting a pretax profit of GBP468.8 million, compared to a year-ago profit of GBP306.2 million. Its revenue climbed to GBP2.69 billion from GBP2.29 billion.

So your business may not be a Taylor Wimpey, but here are 5 Top Tips for a profitable and successful business:-

1.Understand the economics of business

Many thousands of business people out there somehow manage to stay in business with little or no understanding of what it takes to consistently make a profit. They have no idea of how little effort if required to learn the basic of running a business.

Far too many people believe that working longer hours is the only way to produce a profit and stay in business. Worse still, many of them make the excuse that offering top quality products and making a profit are inconsistent gaols.

There is a substantial amount of literature, seminars and workshops on this subject. If you don’t know how to calculate your net multiplier, overhead rate or utilisation rate and the impact on your bottom line, then you really do need to take a few hours out to study the subject.

2.Recruit better people

At the end of the day, all we have to produce our products or deliver our services is our employees. If we have lousy people it only makes sense that we will be unable to produce quality work. If we genuinely want to offer a quality product and make a healthy profit then we need to commit to finding and hiring the best possible staff.

The biggest mistake many businesses make in hiring is waiting until then need people before they start the recruiting process. One of the keys in recruiting better employees is to always be recruiting and interviewing.

Once you identify someone you would like to have on your team, you can either upgrade your current staff or add them on if the workload permits. If you don’t have the workload to justify the new hire and you are happy with your current staff, you can often keep them ‘on the bench’ in a holding pattern until you have something available.

3.Get timely, useful information

Raise the expectation of the information produced by your accounting department. Too often we set our sights too low on what we expect. Work with the accounts team to clarify what information is needed and set achievable goals for producing this in a timely and useful format.

Remember that in order to achieve this goal, everyone in the organisation must cooperate by submitting their returns, reports and data by the required deadline. We can set high expectations for the Accounting department but they are not miracle workers. If they don’t get the required information, then they can’t produce the reports we need to manage our business.

4.Act on this information

You’ve invested in accounting/project management software. You’ve hopefully hired qualified people in the accounting department. They’ve produced the information you need to run your business. So use it!

If a project is over budget, brainstorm to figure out why. Maybe we are producing out of scope work? Maybe the schedule has been extended? Maybe we are receiving conflicting requests from the client? The bottom line is that we need work out why we are over budget and develop a plan of action to get it back on track, otherwise don’t even bother to produce any reports.

5.Hold people accountable

When it comes to producing a profit, one of the biggest problems is that we don’t hold anyone accountable for the results they produce. We produce the reports and can easily see certain areas or managers always under-perform financially.

They consistently over run budgets or maybe have problems meeting a project schedule, or even regularly have difficult customer relations. However in contrast, other people consistently over achieve. They always produce a profit in excess of expectations, they meet their schedules and their customers love them.

When it comes to raise or bonus time, we tend to overlook the shortcomings of our under achievers and minimise the contributions of our over achievers.  Let’s do our best to turn this around by explicitly stating our expectations for our employees. Then we can monitor his or her performance, give feedback as needed and provide the necessary training and make everyone a top performer. At the same time, we need to financially reward our nest performers.

Want to read the rest of the Top Tips for Increasing your profits today?

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