GPS For Your Business
Identify your top three business growth and profit opportunities
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Growth and profits are key to the success of any business, but how do you get there? What are the drivers you need to look at that have the most impact on your business? Profit and growth rates are outcomes, not the things you need to directly change. The Growth & Profit Solution (GPS) diagnostic is designed to give you direction in your business, much the same as a global positioning system (also GPS) does in your car. The GPS tells you where you are, enables you to decide where you want to be and then provides you a route for getting there.
The ten factors that are the key contributors to the profit and growth of your business are listed below:
- Vision – where do you see your company in the future? Most people’s vision is to do better than last year. In today’s global economy that approach will not work. You should have a vision with some step-change in it. With younger employees particularly, an exciting vision will attract and retain the best people. The vision is likely to include divestments, acquisitions, new products and services and hopefully career opportunities for all.
- Profit – is essential for cash flow, dividends to shareholders, and funding your growth. Profit is also a direct reflection of your customer service. Some people feel guilty making lots of profit. Profit is a good thing to aim for; it is not something to be embarrassed about. You must leverage your resources better year after year. Do that, and your profit will also continue to grow.
- Sales and marketing – generate growth and career opportunities for your people. People generally understand the difference between sales and marketing, but do an average job of both. Sales are the life-blood of the organization. The sales process needs to be a machine, something that can be tweaked up and down at will. Sales are not just about increasing the top line of the business. Sales that improve margin create more profit.
- Technology – gives you leverage and efficiency, as well as reinforcing your professionalism. Technology includes machines, new technical innovations, but also includes social media initiatives. Technology is one of the fastest changing tools available to a leader so it is essential that you are on top of it. The rate of change is increasing and is not going away soon.
- Leadership – provides direction and inspiration to the people. Over the last 20 years, leaders have focused on quality, pricing, waste and customer service. Generally the average company does a good job in these areas. Leadership is one of the last things to be considered, in part because there has been little innovation in leadership. How often do you take the time to brush up your leadership skills? What can you learn from your peers?
- People and team dynamics – the key resource for making it all happen. A general rule is that a third of your people are fantastic, you are privileged to have them. The second third, you wonder how they got there. The remaining third are somewhere in-between. People are one of the biggest costs for most organizations, but one we tend to do little to improve.
- Strategy – making sure you are competitive and successful. Do you understand your competitive advantage? Is it sustainable? Do you use it to make decisions? Do you have an up-to-date business plan? Are you planning to make some significant improvements to your business this year?
- Growth – essential for survival in a global economy. Growth creates opportunities, but requires an investment of resources and careful management. The challenge is in making sure you keep the level of risk under control during times of growth.
- Innovation – the application of clever thinking and solutions to your business problems. Under-pinning most of the other factors is innovation. Keep in mind the Pareto Rule, 20 percent of what you do creates 80 percent of your results. That means 80 percent of what you do has limited value. How can you apply innovation to make you a better leader, create more sales, recruit better people and make more profits?
- Continuous improvement – the never ending journey of continuously improving all your business processes. The Japanese have a word for this, Kaizen, meaning continuously improving all the processes in your organization, using all the people. Do you do this? Changing just a few things each day compounds to become significant improvement in your business.
Understanding the key factors facing your business at any specific time is essential for you. What are your current constraints? Businesses aren’t static. As you improve in one area, for example technology, the constraint moves to something else, say profit. Where are your biggest opportunities for improvement?
Why Business Improvement?
Business improvement can be fun, particularly when you share the load with others. It is also a great learning opportunity, if you work with experienced people. You cannot be an expert in all ten areas. What we normally find is that you are good at a third of them, poor at another third, and somewhere in-between with the remaining third. The key is to get help in the areas where you are not strong (remember that will be two thirds of the factors). Your challenge is to agree that you could use help.
Why do I need to do better?
The first thing you need to assume at the start of each day is that you may need to exit the business on short notice. You may get ill, get an offer you cannot refuse, or even just feel like a sea-change. If you had to sell your business or hand it to someone else within the next three months, is the business in good enough condition to transition to someone else? The answer is normally, “Not really, can I have a year?” Imagine if your sales growth was 15 percent per year and your profits were growing at 30 percent annually. What price would you get for the business? What if you had a management team not dependent on you, a great customer base with long term contracts or commitment to your company, and a brand that was highly respected in your market? Now what price could you get for the business? How would that make you feel each day? It might be a lot more fun!
You have a decision to make. Are you happy with the current performance of your business? Could you do better with the piece of the business for which you are responsible? Are you confident that what you will do at work tomorrow will make a significant difference to your long term profit and growth performance? We provide an online GPS Diagnostic tool to assist you in identifying your top three business growth and profit opportunities. Completing the GPS Diagnostic and analyzing the results is a safe first step to making your life a lot more fun and rewarding. Are you able to invest at least 10 minutes to get started?
Byron Hebert, CPA, CTP, is a director at PKF Texas and practice leader for the Entrepreneurial Advisory Services group. PKF Texas can provide assistance to companies looking to implement the techniques detailed in this issue