PROFITABILITY - BY ACCIDENT OR BY DESIGN
A great idea or a great product may or may not make you a
profit. Good planning effectively carried out will almost
always make you a profit and, not surprisingly, the profit
you planned for.
It is that time of year, again. Like new years
resolutions, we start to think about planning. I am
suggesting that, this year, unlike most of them, we
actually take planning seriously and do it.
I propose that we do what I call "Bottoms Up Planning".
Start by answering the question "How much money do I
intend to put in my pocket this year after I have paid all
of the bills?" Once we have decided that figure, we can go
to the next one "How am I going to do it?" If we have been
tracking our financial numbers like we know we should be,
we know that for every dollar of sales, our cost of goods
sold is a predictable percentage. The same goes for
administrative costs, sales and marketing costs, etc. We
also know what our mortgage, rent and other fixed costs
are going to be.
With this we can determine the amount of sales we need to
generate to make this amount possible. If we are in a
billable hours type of business as I am, we know how many
billable hours we need to produce.
The next question is "How am I going to do it?" How am I
going to generate the sales I need to meet my financial
objectives? Do I have enough staff, tooling and equipment
to do it? Think through what you need to get the job down,
how you are going to do it, how much it will cost and what
your timetable is. Write it down!!!
I would love to spend the time here but it would make this
newsletter much too long. If you would like help in
planning for success, give us a call or drop us an e-
mail. Sometimes a new set of eyes gives us some fresh
insights that we don't think about on our own.
