Profit improvement and productivity

Do you already track your gross and net profit but are at a bit of a standstill on how to increase profitability? Think about the relationship between business profit and productivity.

You can increase profitability if you produce more and pay less for what you need to produce and sell your goods or services.

It’s not about cost-cutting. It’s about looking closely at the value you get for what you spend and how you can best create value for your customers.

Start with your fixed costs. You must pay these to keep your business’ doors open. Some of them are negotiable to the extent that there might be a cheaper way to achieve the same effect. Others are non-negotiable.

The critical thing with each is to ask:

  • What service does this provide to my business?
  • Can I obtain the same service from another source at a lower cost?
  • Is it feasible to switch to another supplier?
  • If I did switch to another supplier would I get equivalent quality, and would this affect the quality of my product or service?

Anything your business can do faster or better than your competitors gives you a competitive advantage. If you can produce more for a lower cost, deliver more quickly, serve more clients, improve customer service or increase value add to the customer, the strong relationship between productivity and profitability will help your business thrive.