Managers of any business who do not focus on improvement become process managers at best and Bureaucrats at worst.
We tend to think of sales as the only competitive area of the business, but in reality sales is just the beginning, as competition is maintained throughout the entire business process on a customer-by-customer basis.
There are four ways to improve profits in the company.
Alter the books
Obviously this is not an option at the suggestion level, but it is undeniable that it is a practice that has been used in the corporate world on many occasions, the most talked about case in the recent era is that of Kenneth Lay and Enron
The problem with this type of arrangement is that, it is as much as building a House of Cards, the more it grows the more fragile and at the moment of the rupture a great commotion arises, in no way is it advisable to inflate the books for more than this may give temporary benefits, the end result is always negative. Just no.
Increase Prices
A price increase would be a quick way to increase profit, unless it makes your company less competitive and starts to lose customers. The price increase can work quite well as a resource to increase profitability when your company is the only available supplier for a certain input.
Better still is to increase prices when the quality of the product or service and the business processes have improved to the point of clearly being better than any other competitor. Customers' total cost of doing business, not price, is what keeps them buying. "Buying cheap to save money is like stopping the clock to save time"
Sell more
If you sell more and control the cost of sales, then you will start to make more money. The sales that generate the greatest profitability for the company are usually the sales that are repeated over and over again to the same clients that are already captured in the portfolio. Customer retention and repeat sales are of greater value than price increases.
Reduce Costs
Any reduction in the Cost of Doing Business that does not imply a decrease in revenue will have a dramatic impact on profitability. It is the improvement of the rules of productivity.
Ronald Coase and Frictions in Business
The English economist Ronald Coase wrote that in every business there are frictions or costs related to its operation. There is the cost / friction associated with finding customers or suppliers. There are of course the costs / frictions associated with operating the business. The last and most expensive of these costs / frictions is that of errors, the one related to how badly done it has to be done again and again.
Smart customers understand about the Total Cost of Doing Business. Your competitor's prices may be lower, the quality of their products or services may be the same as yours; But if your business processes are deficient and tend to increase the Cost of doing Business for your customers, then you have NO competitor.
Less Doing More
In our days, as well as unemployment, productivity is on the rise, those companies that are constantly working on improving the quality of their products / services and also the quality of their business processes, will be in a great position to face the challenges that the ups and downs of the economy pose us.
All human entrepreneurship is prepared on the basis of knowledge, that is, what you know is what you can undertake in order to know what you still do not know. Knowledge in business is much more than simple facts or data, it is the orderly collection of information necessary for things to be done well.
Verbal communication of policies (Guides to focus the goal) and procedures (steps necessary to achieve goals) will increase the training time required and will lead to errors. Verbal operations in business are like the promises of the sailor, they last until he leaves, remember that piece of paper speaks.
Every job description for a manager should start with a clear commitment to continuous improvement: Focus on improvement, on how things can be done better at the same or lower cost. If people are not put in black and white what is expected of each one then they begin to saturate themselves with activities and forget the fundamental purpose of their work.
Track where the loose screws are in your processes and reward customers / employees / vendors who report a failure or opportunity for improvement.
Ask new hires for new ideas, new knowledge about how they could do things differently. Write down the ultimate goal for each area of the business. And then ask the experts, the employees of that area, how these goals can best be achieved.
Write down the steps to reach the goal, and then ask the new hires how things could be done differently based on their knowledge.
Don't worry about industry averages when measuring the performance of different areas of the business, it is much more important to focus on continuous improvement, on how things can be done better. Keeping an old customer satisfied takes a lot less effort than getting a new customer interested.
And remember, the bitterness of poor quality lingers much longer, even after the sweetness of cheap price has already been forgotten.
To know more.
www.ejecutivosdecredito.com
www.cimextraining.com
Notification for publications
Under License from the author and A / R Management Group, Inc. www.armg-usa.com. All rights reserved.
Confidently use this article in your publication, to email to anyone on your list, or to copy and distribute; however, the previous authorship message must be clearly visible.
