Op-Ed: How to identify areas of unrealised profit potential Special

Posted May 28, 2014 by Katherine Ogilvie
Preparing a profit and loss statement is just the beginning of assessing a business’s profitability, however being able to identify areas of unrealised profit potential and devising strategies to release that potential is where the real work comes in.
Being a business owner or a managing director is a huge responsibility, ensuring you run a tight ship, manage staff and oversee the day to day running of a company of any size is a challenge. Some people take to business and entrepreneurship like a duck to water whereas others make risky decisions that can end up being costly and ultimately damaging to the company.
Exploring key strategies for profitable areas that have been untapped is a crucial part of being a leader in business as it not only takes creativity but it also requires the skill to see plan implemented and executed well. As the saying goes ‘time is money’, but what if you could buy more time? Formal business accreditations such as ISO certifications and in particularly an ISO 9001 are designed to speed up systems and processes in the workplace thus enabling tasks to be done quicker and more efficiently. Freeing staff up to focus on other bits of work means that they will be able to get more done in the working day and will improve a team’s overall capacity to do more. ISO accreditation organisation QMS International Plc reported that their clients saw an increase in new clients since being certified as well as an increase in productivity.
Many business owners sight ‘growth’ as their top priority in order to improve overall profitability of their company and see gaining new clients as a primary goal. Hiring star sales people who have a reputation of bringing results to a company is also a shrewd move, especially if it is only for a short-term contract or even a freelancer where their fee can be commission based or include incentives to ensure results. It’s always worth reviewing your existing sale and marketing strategies and whether the staff dedicated to that area of the business are performing as effectively as they can be or whether it would be worth considering outsourcing to an agency to deliver return on your investment when it comes to marketing and generating new leads.
Speaking of which, many companies, especially marketing companies, have reported that the majority of their leads come through a referral or recommendation from someone else, still proving that networking should always be on a company’s agenda. Similarly, forming strategic alliances with other local businesses can often be a mutually benefiting venture, especially when each organisations service compliments another.
Naturally being able to assess a business’s profitability is integral but as Farnell Clarke a Norwich accountants recommend, “actively aiming to increase your cash flow could reduce the amount of fixed capital you need at any one time”- not to mention make it easier to plan as well as fund for future growth. By doing this it also gives you the flexibility to rapidly respond to changes in your industry or marketplace. If you find that your sales figures aren’t quite meeting the expectations you had it is worth asking yourself whether you are pricing your service or product competitively.
Another key strategy that many senior figures in management often forget to utilise is profit sharing with employees which is an alternative way to investing in your bottom line. If you’re a small company, having regular business development updates allows you to effectively communicate to your team the lay of the land which can often spark motivation within a workforce and essentially invest themselves in the aims and goals of the business. Again, even with a larger company being transparent about financial goals with employees enables everyone to share achievements but also burdens.
Inevitably wages constitute a large bulk of a company’s spend so it is vital to factor in the value of an individuals’ contribution and work when setting salary levels. First and foremost it is worth assessing the value of a particular job role as well as keeping a continual close eye on the labour market in order to uphold competitive remuneration levels.