Originally published at: https://blog.12min.com/double-your-profits-pdf-summary/
Which entrepreneur does not dream of multiplying profits? It sounds like a distant dream, doesn’t it?
Bob Fifer, a leading financial advisor, says that this is possible and brings us a clear plan to get there.
In Six Months or LessIn his research, Bob Fifer analyzed several American companies to give you a guide on how to increase profitability.
First, keep in mind that your primary focus should be profit. To increase return, you need to work on three major pillars: culture, costs, and sales.
You will learn how to considerably increase your profits with this microbook!
"Double Your Profits Summary"
A Company Focus Must Be ProfitsThe primary concern of any business must be lucrative: a profitable company has the money to reward employees, offer exciting careers, and invest in new products, companies, and technologies.
Less profitable companies inevitably sink into mediocrity in every way - regarding morality, product quality, etc. Doubling profits requires focused, consistent, firm and fair management, willing to become different and better than most other companies.
Creating A Lucrative CultureIt is important to rely on meritocracy and use the philosophy of continuous improvement to increase your profits. This philosophy should be part of the company's culture, creating and encouraging a culture of excellence among all stakeholders.
To create a winning culture, employees must have the opportunity to reach the top, but only the best should be able to get there and be rewarded for it.
Some important points to disseminate a culture of success in your company:
- Focus on what is important, the results of the enterprise: Beautiful names for areas and positions will not make a difference in productivity.
- Do not build new processes unless necessary: methods are costly and usually do not generate useful results.
- Define the mission of the company and make it clear and straightforward for all employees: Be the best company in the market. This clarity will move the entire company to excellence.
- Never be sorry for thinking about profits: Never apologize for the effort to maximize profits. There is no need to apologize. If you are frank and in favor of increasing your company's profits, your employees will act the same way.
- Only quantify what is essential: No one should waste time quantifying a problem whose solution is already known. Quantifying costs time and money and does not increase profits.
- Give urgency to important things: You must assign importance to the most vital. You must insist on creating a culture that states that nothing important takes more than a few minutes, or a day, or a week - or a month if it is complex. Always set short deadlines.
- Maintain a shortage of resources: There is always a need to keep a significant scarcity of resources since this is the only way to get people to separate productive tasks from those that are not. *Be the best and reward the best.
Reducing Costs To ProfitCutting costs should be taken very seriously. You have to be among the best in the world to make businesses run better at a lower cost.
Costs should be categorized between strategic and non-strategic. Strategic costs are spending on things that apparently add to the business and improve in areas of business, marketing, and R&D (Research and Development).
Non-strategic costs are the costs necessary to run the business but do not directly bring improvements or profits. An example of a strategic cost is sales investments. An example of a non-strategic cost would be a reform of the firm’s office.
Double Your Profits
The company needs to follow two main rules for managing its costs: overcoming competitors about strategic costs during good and bad times and not pulling any punches when it comes to cutting non-strategic costs.
It is important to analyze costs to succeed in reducing non-strategic ones. It is crucial to think that all non-strategic costs are unnecessary and must be justified. There are no "off-limit-costs, " and the manager needs to assume that all other expenses can be discontinued unless proven otherwise.
Managers make the mistake of being cautious in cutting costs. Cut first and ask later. An advantage of reducing costs is that if you make a mistake, someone will be ready to tell you almost immediately, and you’ll be able to fix it.
Another important point of attention is in the decision making: decisions must be made without delay. If you do not need data, do not spend your time analyzing them, make a wise decision quickly.
A good manager does 1% of the work, but contributes 50% of the value of the company, because his discernment to make good decisions generates profits.
Also, it is important to set deadlines for stakeholders to meet. Not wasting time is essential for cutting costs and increasing the profitability of the company.
Superiors must authorize extra costs. Items such as material purchases, the hiring of employees and others should be looked at on a case-by-case basis. This discretion will help eliminate useless costs and decrease unnecessary spending in the company.
Also, suppliers should not be overlooked. It is important to reduce these costs as well. Have someone from the board or management take responsibility for negotiating prices with vendors.
It is imperative to be someone in a higher position because suppliers are already used to dealing with buyers and know how to negotiate with them. Have a director or a manager analyze the costs of each provider thoroughly.
Also be concerned with research and development. Often, executives leave control in the hands of researchers because they do not have the knowledge to do so. You should look for a suitable manager who can measure the company’s R&D return, increasing your chances of profitability.
Researchers usually do not have business knowledge and are not concerned with profit, so this care is essential.
Finally, cutting costs should not privilege anyone. The goal should be to increase the overall profitability of the company and eliminate unnecessary costs. Therefore, no office or department should be safe. The intention must represent the individual and collective effort to achieve better results.
Here are some winning tactics for cost reduction:
- Know that it is always possible to reduce costs: The first step in reducing costs is to see all values as, at best, a necessary evil. Every cost is something that must be ruthlessly and as far as possible banned from any firm. There are no off-limit costs, and they are obstacles in the company. Ask yourself: if you eliminated an individual cost, what would you lose regarding revenue and profit? How and where? If you do not know, then you do not need this expenditure. Only maintain costs that are extremely necessary; you do not have to think twice to eliminate them. Eliminate first and think later!
- Demonstrate competence: Firmness and ability generate respect, not resentment. It is the combination of toughness, incompetence, and mediocrity that engenders resentment. Therefore, if you demonstrate competence, your firmness will be accepted.
- Inform your suppliers of their cuts and freezes: There is an almost immediate way to increase profits. Send a circular to all vendors, saying that times are bad and that from now on (or in the next twelve or eighteen months) you will not accept price increases, so there is no use in insisting.
- Delay your payments if needed: An easy method to favor your company’s balance sheet this year, although it only works once is to delay your payments. Most vendors prefer to wait to receive it to permanently losing you as a customer. Never pay a bill until the supplier covers your company at least twice. Some providers may take up to two years to claim payment for a bill. Also, whenever there is a price increase tell the suppliers that you are going to research the competition. This technique works most of the time and can help you maintain your margin. Find out how much your competitors pay for the product and what their suppliers and schedules are.
- Make a plan to save: plan a saving of 15% in product purchases and 30% in contracting services. If you cut too much, some people will complain. Let them complain and wait. If they complain too much, rethink about that particular cost.
- If necessary, fire employees: It is impossible to convince them that you believe in a meritocracy if those whose performance is small can keep on the job and receive the salary. Firing a bad employee encourages others to produce more for the benefit of the company, and that is a meritocracy. It is possible to reduce up to 25% of staff in most companies without anything happening - without any loss of value.
- Staff Control: A busy employee is forced to set priorities and does what is important. When it comes to staff, micromanagement or lack of oversight may inevitably lead to slow and ineffective employees. The only way to promote efficiency and eliminate unnecessary work is to keep human resources scarce.
- Benefits and Bonuses: Pay good salaries and only offer benefits that your people value. Any bonus, any perk that becomes "automatic" no longer has value as motivation and becomes an instrument of maladministration, not good management. Bonuses, rewards, and punishments are significant, with bonuses being more effective when granted on a case-by-case basis and at irregular intervals. Grant raises whenever they are earned and never otherwise.
Therefore, it is vital that the company’s culture be responsible for showing the importance of reducing costs for the company; make it a part of the firm’s routine. It is also important to value employees who strive to make this happen in the best way.
You should understand that when selling, you should not see the customer from a company’s point of view. You should see the client as a person and, as such, emotions are critical when closing a deal. Whenever you make a sale, be sure to ask why the customer is interested in the product.
Also, keep in mind that depending on your type of business and your field, customer loyalty is essential. It is much easier to sell to a loyal customer than to win over a new client; so seek satisfaction and rapport with your customers first.
There are five ingredients for a successful sale:
- Show your competence;
- Demonstrate empathy;
- Be loyal;
- Play hard to get;
- Use the customer problem to turn your interest in them into an obligation from them towards you.
- Your consumers are not buying a product from you, they are in pursuit of satisfying their needs.
- To make a deal, you need to have confidence in yourself and your product. Do not hesitate or the customer will not have confidence in what they are buying. No matter how small, the consumer can perceive any hesitation on your part.
- Attract your buyer: We do not buy anything we do not like; we prefer to buy from people we feel some empathy or at least that arouse our interest in some way. Part of the process of selling is creating a need for the buyer. This attraction means having charisma, good manners, and a pleasant personality. It also means having a sense of humor and interest in what happens around us and the world, knowing how to listen, and being easily understood.
- Set your price the right way: Most companies forget money on the table when it comes to calculating prices. The first rule of price calculation is the simplest and most sensible, yet it is the most overlooked of all: always charge, from each customer, the highest price they are willing to pay. Ask yourself if a price increase would make the client no longer a customer.
- Ask how much the customer is willing to pay: find out the sensitivity to the client's price. Talk about product price ranges and study the customer's reaction. That way you have a sense of what price range you can work with, and you may be able to charge the highest possible price.
- Target your customers to offer more customized products: this way you can charge higher prices and maximize your profit.
- Offer more than one product to the customer, so it will be more difficult for him to refuse the sale.
- When you lose a sale, review what happened. Study your mistakes and evaluate how you could have circumvented the situation; What should you have done differently? Try not to repeat the same mistakes with other customers.
- Regardless of your sales process, respond quickly and professionally and do whatever it takes to meet your customer's needs.
- Maintain a good relationship with the client in the after-sale. If he bought it once, he could buy it again as long as he feels confident about you and your product.
- Do not forget to invest in marketing, your salespeople and customer support. These are essential areas for attracting and retaining customers.
Final Notes:If you want to double your profits, worry primarily about these three aspects of your business: culture cost reduction and increased sales.
For this, it is imperative that your employees also see the importance of these points and feel motivated to help the company achieve its goals and objectives.
Working in a meritocratic environment is essential. Seek to recognize the best and those who strive more for the collective goal and communicate what you expect from each professional.