Business Managers not focused on improvement become administrators at best and bureaucrats at worst.

We tend to think of Sales as being the only competitive area of business, but that’s only the beginning; competition continues beyond Sales through the entire business process.

Improvement Equals Profit Enhancement

There are 4 basic ways to improve the bottom line:

1. Cook the books.

Long before the guys at Enron there was another Texan who bamboozled for profit. Billie Sol Estes made the cover of Time Magazine in the early 1960s as the "Texas Wiz Kid". An inquisitive child, Billie Sol grew to be an inquisitive man; he figured out that liquid fertilizer was lighter than water and was worth a whole lot more. Huge storage tanks filled with water, except for the top 2 or 3 inches of liquid fertilizer, provided the security for loan after loan. He also once borrowed money on his neighbor's cattle.

Billie Sol built a financial empire on one shady deal after another. He had all the politicians in his pocket, including LBJ. There’s a down side to "cooking the books", you may end up with a room mate named Burno who insists you wear a little apron. . . Don’t do it!

2. Raise Prices.

An increase in prices should increase profitability; unless you end up being noncompetitive and lose customers. Raising prices works best when you’re a sole source provider or when you have more business than you can handle. Remember the 90s?

Better still is raising prices when the quality of the product / service and business processes is higher / better than anyone elses. It’s the customers’ total cost of doing business, not price that keeps them buying. "Buying cheap to save money can be like stopping a clock to save time."

3. Sell More.

If you sell more and control the costs of those sales you’ll make more money. The most profitable sales are most often the repeat sales to the same customers. Customer retention and repeat sales are tied to more than price.

4. Decrease Costs.

Any reduction in cost of doing business without loss of income will have a dramatic impact on profitability. Improved productivity rules.

Ronald Coase and Friction in Business

An English economist, Coase wrote that there is friction or costs involved with business entities. There’s the friction/cost of "searching" for customers and suppliers. There’s the "coordination friction/cost" of on-going business processes. The last and most expensive friction/cost, is that of "failure", of something going wrong and having to be redone. The CEO of a chain of white table linen restaurants estimated that for every meal sent back, 32 new meals had to be sold to make up the loss.

Smart customers understand about the "total cost" of doing business. Your competitor’s prices may be lower, the quality of their product/service may be equal to yours; but if their business processes are screwy and drive up the customer’s cost. . . you have no competitors. You don't have to be twice as good as the next guy, be just a little better and you stand heads and shoulders above competitors.

Fewer Doing More

Unemployment is up, and so is productivity. Those companies that constantly work on improving the quality of their product/services and of their business processes will be the survivors. The future holds more of the same.

Document Knowledge / Expectations

All human endeavor is predicated on knowledge, on what you know. Business knowledge is more than facts or data; it’s the "orderly collection of information needed to get things done."

The verbal communication of policies (goal driven guidelines) and procedures (steps needed to achieve goals) expands on training time and creates errors. Word of mouth business operations are like a sailor’s promises while on shore leave, they’re not worth the paper they’re not written on.

Every manager’s job description should start with a commitment to improvement; "Focus on improvement, on how things can be done better for the same costs or less." If people aren’t told in black and white what’s expected of them, they get busy and forget.

Track the source of screw ups and reward customers / employees / vendors who tell you of a failing, of an opportunity for improvement.

Write down the goal(s) of each business function and then ask the experts, the employees, how the goal(s) can best be reached. Write down the steps necessary and ask new employees for new knowledge; how they’d do things differently.

In Closing

Don’t worry about industry averages when gauging the KPIs for different business areas; it’s much more important to focus on improvement, on how things can be done better. It takes a lot less effort to keep an old customer satisfied than to get a new customer interested.

And remember, "the bitterness of poor quality lingers long after the sweetness of cheap price is forgotten."

Abe WalkingBear Sanchez is an International Speaker / Trainer / Consultant on the subject of cash flow / sales enhancement and business knowledge organization and use. Founder and President of www.armg-usa.com, WalkingBear has authored hundreds of business articles, has worked with numerous companies in a wide range of industries since 1982 and has spoken at many venues including the Shakespeare Globe Theater in London.

• 0 Comments

  

Comments

 Add your own comments

Name:

Email Address:

URL:
Remember Me? YesNo

Comments: (you may use HTML tags for style)

What next?

 Digg it

 Save This Page

 Subscribe to GetEntrepreneurial.com

 Leave a comment

Next Article: 5 Strategies for Creating Effective Follow Up »

Previous Article: 5 Common Mistakes People Make When Starting Up a Small Business »

Abe WalkingBear Sanchez is a GE Network Expert. View Abe WalkingBear Sanchez's profile or read more articles from Abe WalkingBear Sanchez. Learn more about the GE Experts Network.

Have an expert opinion on issues entrepreneurs and small business owners face everyday? Join the GetEntrepreneurial.com Experts Network and share your expertise with the community!

The new GE Experts Network is inviting seasoned entrepreneurs and small business owners to come on board and contribute small business advice to our community of aspiring entrepreneurs. If you have an effective way of generating sales or you know how to use social networking to connect with your customers, join us in providing wider entrepreneurial content that would benefit small business owners worldwide.

Click Here to Learn More >>

Related Articles

 Green Liquids to Make Your House Clean » Trendwatching: In an ECO-ICONIC world, visibility counts, for big and small products alike. Which, in the case of cleaning products, means exposure will...

 Lava Lamp Shot Glasses » CoolBuzz: They say after you have had your fill of booze, you might just end up seeing stars. But here's an innovative idea...

 Shirt History » CoolHunting: Re-Shirt is an Austrian-based company that resells second-hand t-shirts. What sets them apart from other online boutiques is that every shirt comes...

 Urban Mining » A recent Reuters wire story (picked up here in the International Herald Tribune) describes the new trend of "urban mining" - of...

Need more brand new promising business ideas and innovations around the world you wish you'd thought of? Visit CoolBusinessIdeas.com now!

Ever wanted to be the CEO of your very own Starbucks or Amazon.com? Fire your boss and be your own boss? Now you can, with BIZNESS! - the free biweekly business newsletter about new business ideas, opportunities and innovations from around the world. More than just new business trends, BIZNESS! helps the aspiring entrepreneur (you!) with small business advice, business tips, and entrepreneur resources and opportunities.

   Subscribe for free now!    

---