The context of this quote from an MD was that their business is quite capable of winning large, profitable contracts. But it’s also quite capable of winning much smaller contracts which reduce profitability because they can get in the way of the big ones.
Which means the directors get bogged down with details and problems related to several small projects and have less time to work on the important contracts and new business that’s driving profit.
Their solution? Ditch the smaller stuff – less is more.
Which parts of your business hold your profitability back?
It’s great to grow sales, increase in size and be busy but do you know where your profit is coming from and where it’s not?
Can you measure:
- profit by client
- profit by product or service
- project profitability
- how much time is being committed to each client, project, sale
If you can’t then you won’t improve profitability and there’s a good chance you’ll trip yourself up on the less-profitable stuff and miss opportunities in the part of your market you really want to be in.
However, once you start to measure the right things you can identify what’s holding you back and make changes that make money.
It’s not always about doing less
There are other solutions available, it’s not always about turning work away.
- increase prices to make more profit from the problem contracts
- train or recruit staff who will handle the smaller contracts
- start a new business that handles particular products / services
But you can’t do any of it unless you are measuring your business properly – all roads lead back to good management information!
Visit our dedicated Profitability services page to learn more about how we can work out where your profit improvements can be made.