Increase Profit by Setting Goals

It’s that time of year again! Not just time for year-end reports and the beginning of tax season; it’s time to look back and evaluate the past year and set new goals for the coming New Year!

Setting goals is easy… achieving those goals takes a plan as you well know. So how do we know our plan is working as we progress through the year? Much the same way progress is measured on a road trip… with numbers! How many, how much and by when?

Some call these measurable objectives!

If your goal is to sell 500 more widgets this year… a measurable objective might be that by April you should have 125 more sold, by July 250…. If your goal is to decrease operating costs… create timeline that includes measurable results!

Once a draft of your timeline is complete, fill in supporting details of how and who for each objective. For instance, what is the budget to accomplish the objective, what company resources are available to use in accomplishing the objective and who will be accountable for the objective’s success?

Finally, be sure to review your draft with those who will be responsible for the final outcome and consult those within your company or trusted associates outside of your company for recommendations before completing the final version. Make sure the goal supports the company mission and visions.

Post the final timeline with expected objectives in a place where actual results can be tracked along-side and evaluated by those who are responsible for meeting the end results. Meet as often as needed to allow time to check in and offer pats on the back or make necessary revisions to improve results.

Simple Sample

Company Mission: Be the number one spring manufacturer in America by manufacturing top quality industrial springs and adding value to our customer’s supply chain.

2010 Goal: Increase profits by 20% by selling 100 more large industrial springs

Accountable: Marketing manager Tim Brown will oversee this goal and report progress at each month end to Owner Rich Springer… outcome of this project used to weight year end bonus.

Budgeted actions allowed are:
Increase dealer promotions by 5%
Increase sales person incentives by 5%
Educate businesses on the superb quality of Springer and exceptional customer service of our company through ads and articles in relevant trade publications
Increase warranty offered on springs
Provide small samples at trade shows

Timeline with expected outcome: (roughly 10 more / month once campaign is in full force)

Jan (3) Begin sales person incentives
Feb (8) Begin dealer promotions, Ads begin in trade magazines
Mar (15) Spring Trade Show Colorado
April (25) Article on spring alloys published in trade magazines
May (35)
June (45)
July (55)
Aug (65) Trade Show in Texas
Sept (75) Article on production quality of springs published in trade magazines
Oct (85)
Nov (95)
Dec (100) Goal Achieved

For More Great Goal-Setting Help

Setting Goals the S.M.A.R.T. way:
Author and Business expert Jim Donovan spells out goal setting the S.M.A.R.T. way:
“When setting goals, it is important to use the S.M.A.R.T. method, whereby each goal is Specific, Measurable, Actionable, Realistic, and Timed. Specifically, what will you accomplish by when? Then, from your list of goals, you can develop 30–90 day milestones and further reduce those to identify the daily actions that must be taken in order to succeed.”
(www.articlesbase.com/corporate-articles/a-crystal-clear-vision-ensures-success-throughout-your-organization-208527.html)

www.goal-setting-guide.com/smart-goals.html is another great site breaks down the S.M.A.R.T. acronym and provides detailed tips to this fabulous and simple method!

Final Thought

Often we get so caught up in our drive to set goals that we leave out an important ingredient – fun! At least that is what often motivates me to participate in many projects. Okay.. sometimes the motivation is money, sometimes a trip somewhere or time with someone special.
What motivates your team? What is going to motivate your customers to stick with you? What is going to motivate a potential customer to switch? What motivates you?

Happy & Prosperous New Year to You

Increase Profits by Getting to Know Your Customers

How often does business operate on status quo? We know our customers are satisfied because they continue to order from us. We care about our customers and we think they are happy because the orders keep coming. Often we don’t get a clue that customers could be happier until sales drop... then we scramble to find out why. Profits drop and we are left with a skeleton marketing budget.

Kevin Cacioppo, Global Account Leader, recently wrote a very informative article “Measuring and Managing Customer Satisfaction” for Quality Digest.
(www.qualitydigest.com/sept00/html/satisfaction.html)

In his article, Kevin Cacioppo points out some interesting facts:
“A 5% increase in loyalty can increase profits by 25%”
“Only 4% of satisfied customers will complain.”
“The average customer with a problem eventually tells nine other people.”
“Satisfied customers tell five other people about their experience”
There is a connection between unhappy customers and aging receivables.
“…. it costs five to eight times as much to get new customers than to hold on to old ones…”

What does Mr. Cacioppo recommend we do to make sure our customers are happy? Develop an objective customer satisfaction survey that asks for specific information while taking into consideration subjectiveness. Next, Mr. Cacioppo makes some suggestions on how to put that information to use, like connecting customer satisfaction measurements to the bottom line and…. Maybe even to BONUSES!! Mr. Cacioppo gives some great helps on tailoring customer satisfaction questions to meet survey objectives.

I would like to add that while open-ended questions are more time consuming than yes/no or on-a-scale-of-one-to-ten questions, they are great for gathering information about the customer’s experience. Surveys can include a multitude of methods to gather information… incorporating all three types of questions. It depends how much time and resources you are willing to invest in retaining customers, and how you intend on measuring/tracking the results.

Often, survey questions about customer satisfaction can be asked in a conversation format while following up on orders… for instance:
“Ms. Valued Customer… how is our delivery time working out for you?... Are you receiving our product in a timely manner? How about invoices… are you receiving those in timely manner? Do we need to renegotiate pricing? Do you have any problems we can help you solve ?... is our product keeping your own customers happy?” Understanding and meeting your customer’s needs is vital to keeping customers. Find out what their problems are and create solutions!

Remember, there is a human side to your customers... not all business... customer satisfaction surveys are also a good time to get to know your customers and note that perhaps they are Steelers fans or cheer for USC…. That they celebrate Christmas and Kwanza... maybe they are new grandparents... or this is their first company. When you start to see your customers as more than a sales order number with an invoice number to follow… watch your profits increase…. and your life become richer in terms beyond the bottom line. It’s a given.

Finally, keep up on how competitors are keeping their customers happy! Sometimes we don’t like to pay attention but remember… you may ignore competitors but your customers might not...

Before you jump in and dedicate a team to customer satisfaction surveys, I highly recommend giving Kevin Cacioppas article a read; he offers some very useful and expert insight to the vital task of measuring customer satisfaction.

By the way, a great conversation starter is gift giving. My new neighbors just dropped off a tin of Christmas cookies they and we spent a few minutes getting to know eachother a little better. We celebrate the same faith and like chocolate covered pretzels!

Merry Christmas to everyone out there in cyberspace.

Increase Profit as You Improve Communicaiton

Communicate and Prosper! by: Helen Wilkie

“How much has poor communication cost your company in the past twelve months? Chances are, you have no idea. …. But you won’t find the numbers in the financial statements or year-end departmental reports. Nothing shows up saying "lost productivity due to miserable meetings" or "missed business opportunities through sorry selling skills" or "employee quit because there's no communication around here….. “

“By improving the way people (and I mean people at all levels) interact in order to get things done, we can increase productivity—with its attendant positive impact on the bottom line.." (http://www.smallbusinessland.com/article/communicate-and-prosper.html)



Communicating at work: Facilitating good communication
By Jan Evers Kentucky

...Acknowledge others communicating with you verbally and non verbally.
....Rephrase thoughts. It is often good to rephrase and repeat what is being said to you back to those who are speaking. This insures not only that you understood what they said but more importantly what they meant.
....Give examples. Using examples or personal experiences is a helpful way to communicate your ideas.
....Use good diction. Speaking clearly and distinctly is extremely important. People may miss your point if you are hard to understand.
....Maintain a positive attitude. You can communicate with a positive attitude whenever you speak. People will be more interested in what you say if you are using a positive sentence structure too.
....Listen actively. Listening is the key in developing any type of relationship.
....Interpret. Read between the lines of what is being said. Some people have a hard time expressing themselves. You can help them by trying to interpret what they mean.
....Share. Sharing your ideas is a personal effort to relate to others.
....Build trust. You need to build a bond of trust between you and the others in the conversation. Make them feel more at ease and they will be more likely to exchange ideas.
....Make a connection. True communication requires a connection between the parties to a conversation. Try to build a connection. Find a common ground or common interest to open the way to a good conversation.
(http://slincs.coe.utk.edu/gtelab/learning_activities/22evej.html)


Communication is not rocket science….
some days it just takes work and diligence.

All guests are invited to comment and share stories on communicaition.

Increase Profit by Reducing Group Dysfunction

“It’s like this all over the place.” Mass lay-offs, shifting workloads and once stable businesses closing has left many workforce survivors on edge. Many workers are adjusting t to added job responsibilities or literally fighting to hold onto current positions. Communication and workflow is compromised. People feel threatened as boundaries are encroached and futures are uncertain.

The result is group dysfunction - - usual office politics has turned into "Survivor" as some co-workers go as far as damaging products and services to make each other look bad. Other employees are working under conditions where they are caught in the dysfunction of upper-management. Even the stress resulting from others’ dysfunction can affect the most well-meaning employee.

How does workplace dysfunction hurt profit?
...Wasted time and effort from poor communication, re-work, disorganization
...Duplicated efforts when job duties get blurred during re-organization
...Unassigned tasks that fall through the cracks during re-organization usually don’t surface until something goes wrong, disrupting productivity
...Reduced product quality means call-backs and wasted materials, increased overhead
...Poor service will compromise customer relations
...On-going stress has proven to affect health and number of work days missed
...Mistakes can lead to missed opportunities or worse -- lawsuits

So how does a good leader fix the dysfunction?
...The bottom line here is that trust has been compromised. Weather it is trust of co-workers, upper management, “the system,” even of their own abilities in some cases.
...Building and sustaining trust is as vital as building and sustaining revenues.

In his book The Five Dysfunctions of a Team, Patrick Lencioni, points out that absence of trust is the foundation of a dysfunctional group- followed by fear of conflict, lack of commitment, avoidance of accountability, and inattention to results.

The good thing is that building trust doesn’t have to be worked into the budget and outcomes can be witnessed rather quickly as the workplace focus turns to meeting organization objectives instead of crisis management.

Some ideas on how to build trust:
...First of all, recognize that in every team formation/reformation there is a period of reestablishing roles. This may involve some normal conflict among the employees as roles and boundaries are reestablished – speaking up is a sign of trust and can be a good thing when it addresses relevant issues – as a leader, monitor and guide employees through this period of adjustment. (Tuckman & Biggs Group Development : Forming – Storming – Norming –
Performing – Adjourning)
...Create a non-threatening environment by encouraging employees to discuss their own mistakes so they can learn from them.
...Encourage employees to ask for help when needed.
...Help employees establish vital lines of communication and make sure as a manager your communications are clear
...Encourage employees to voice concerns about changes in the workplace and offer solutions.
...Build moral and group synergy by recognizing employee accomplishments, strengths and contributions feeling valued is also a great stress buster.
...Create small experiences of team success resulting from a changed policy – keep it small – the positive experience will reduce resistance to change and carry over to other team efforts.
...Provide opportunities for employees to bond and share experiences.. Some companies let a service answer phones once a week while they all enjoy pizza for lunch.
...Communicate/ post relevant objectives and company mission statement.
...Be aware of potential co-worker sabotage and establish a no tolerance policy.
...Above all, try to keep a sense of humor – laughter relieves stress – brings down walls.

“If you could get all the people in an organization
rowing in the same direction,
you could dominate any industry,
in any market,
against any competition, at any time.”
Anonymous from The Five Dysfunctions of a Team by Patrick Lencioni,

Share your experience.. . are you working in dysfunction? Not working in dysfunction? What do you or your company do to prevent a dysfunctional scenatio? Please keep co-worker names anonymous. There will be more on building teamwork to increase profit this week.

Increase Profit with Discount Pricing

Right out of Sam Walton’s lesson book:
“…. by cutting your price you can boost sales to a point where you earn far more at the cheaper retail price than you would have by selling the item at the higher price. In retailer language, you can lower your markup but earn more because of the increased volume.”
Sam Walton: Made in America by Sam Walton with John Huey

Sam Walton – founder of Walmart and Sam’s club continues to profit from this philosophy today. Of course he coupled it with ambition and a wife who was just as eager for him to succeed as he was. Walton committed to buying everything direct from the manufacturer – in bulk. The profit was all his.

However beware – if you are offering high end products there is a fine line between offering competitive discounts and altering the reputation of your product. Some items call for the higher markup. Customers who can pay the higher price will with the belief that the higher price equates a superior product. Sometimes price is associated with prestige. For instance, owning a Harley Davidson bike is a sign of success.. if you can afford a Harley – you must be doing pretty well!

Before price cutting, consider the market you are trying to reach. Consider the image of your product and promote your product accordingly.

To explore price cutting, revisit that simple CVP Calculation from posting “Profit 101” earlier this week:

Profit = (Sales-Variable Costs) – Fixed Costs

Don’t forget – Taxes are subtracted out of your profits
Variable costs are actual cost to produce or your cost per unit
Fixed costs are just that – costs you have even if no units are produced

You can manipulate the calculation to figure out how many units you would have to sell to reach the profit you want. Be sure to calculate any additional promotional or marketing costs for your price cutting campaign…

Units = Fixed Costs + Profit / (Selling Price Per Unit – Variable Cost)

3,000 sandwiches = ($2,500 + $5,000) / ($4.00 -$1.50 )
So lets say you have a sandwich shop. You are used to making $5,000 profit per month by selling 3,000 sandwiches at $4.00 each. Business has slowed due to a recession and workers that have not been laid off now take their lunch to work more often instead of buying your sandwiches. You are selling fewer sandwiches and making less profit. Can you win your customers back by price cutting to $3.00? How many more sandwiches will you have to sell each month to keep your $5,000 profit?

5,000 sandwiches = ($2,500 + $5,000) / ($3.00 - $1.50)
You would have to sell 5,000 sandwiches.

Selling 2,000 more sandwiches in bad times might not be realistic. So you make some changes in your costs by getting a better deal on insurance, putting in energy efficient lighting, buying paper products in bulk (from Sam's Club) …. Now you only need to sell 4,000 sandwiches a month. You know that this discount will win many customers back, plus you forecasted an increase in sales as you also begin to target hungry job seekers .

4,000 Sandwiches =($2,000 + $5000) / ($3.00 - $1.25)

Give it a try on paper first.. there are also some great on-line calculators to help you out --
here are a couple of them... good luck!

http://www.steinermarketing.com/calc_break_even.htm
http://www.fast4cast.com/break-even-calculator.aspx

You are invited to share your experiences with price cutting- did it work for you?

Increase Profit with Internet Sales

This week, How to Increase Profit Now continues to focus on increasing sales. If you are not already utilizing cyberspace to maximize your selling potential, you could be missing out on reaching customers on many different levels..

“According to a survey by Forrester Research and Shop.org, US online retail sales rose an average of 11% in the first three months of 2009……Looking ahead, Citi Investment Research projects that US retail e-commerce sales will grow 4.4% in 2009 to $141 billion—and jump to 16.5% growth in 2010. “ (http://www.emarketer.com/Article.aspx?R=1007058)


Two sites to visit that will help choose a web hosting service:
http://www.bestofthewebhosts.com/?gclid=CKDtiebFuZ4CFYdd5Qod3iPYog

http://www3.web.com/diy-website-design/index_tc.html?tsalp=ph2&plan=bsl&ctype=1s79&aid=CD640&bid=48832&pid=79&opt=&subid2=GO507684C_cheap_domain_name_registration_web&subid3=GO2957929486&subid4=gweb&refcd=GO507684C_cheap_domain_name_registration_web&tsacr=GO2957929486

Yahoo also has a web hosting service:
http://smallbusiness.yahoo.com/?s_fptrough=ysb_acq_smallbiz_20081001


Next, read this Allbusiness.com article. It will walk you through setting up your site to market and accept payments.
(E-Commerce 101: How to Start Selling Online) www.allbusiness.com/sales/internet-e-commerce/2637-1.html


Now that your site is up and running, it is important to get noticed!


e-How has some excellent advice on promoting your business on line:
· Read blogs relevant to your product and comment
· Write short articles for Ezineartilces.com
· Post a free add on Craigs List
· Join discussion forums
(www.ehow.com/how_4578074_market-small-business-online-free.html )

Wikihow is also a great resource for web site “how-to” info:
· Search Engine Optimize your site: Make sure your site has the necessary meta tags (description, title, and keywords), alt tags, title tags, and copywriting.
· “Register your site with search engines: Submit your site to the major search engines (Google, Yahoo, MSN) and directories (DMOZ)”
· Build links: Ask other related sites to link to your site. You'll have better luck if your site offers solid resources, tools, or tips for readers. Also submit to related directories.
· Add your site to local searches: Most of the search engines have local search functions, and you should definitely appear there. Visit www.local.yahoo.com, www.local.google.com, and www.superpages.com to list your site.
(www.wikihow.com/Market-Your-Website)

Good luck and see you on the Web!!

Increase Profit by Exporting - Easier than You Think

Increase Profits by Export – Easier than you think!
Remember the easy CVP Calculation posted yesterday?

Profit = (Sales – Variable Expenses) – Fixed Expenses

One obvious way to increase profit is to increase sales. But how do you increase sales in this economic environment?

One not so obvious way to increase sales is to find a new market – new customers – over seas! Or just across the border. The value of the dollar has declined which means great deals on our products for our distant neighbors.

About.com points out this very concept:
When the dollar declines, it makes U.S. produced goods cheaper and more competitive when compared to foreign produced goods. By Kimberly Amadeo(http://useconomy.about.com/od/tradepolicy/p/Dollar_Value.htm)

There are even government organizations who want us to export so bad that they will hold your hand through the entire process – even help you find customers in a different country:

Importing and exporting goods is a great way to expand your business and take part in the global economy. In fact, companies that do business internationally grow faster and fail less often than companies that don't. (http://www.business.gov/expand/import-export/)

Leverage the expertise, resources and connections of the U.S. Government to find and establish business relationships with potential agents, distributors or other strategic partners overseas. (http://www.export.gov/)

Follow the gov’t links for more info and help on exporting – good luck!

You are invited to respond to this post.

Increase Profit 101 : Cost Volume Profit Equation

Consider this scenario described in a recent Business Week article:

“Letterheads Inc., an office stationery printer and distributor located just outside Savannah, Ga., should be making a 10% profit margin every year. It has a solid customer base despite the recession, and it's been able to negotiate some great price deals from paper and ink suppliers because of the recession. Those vendors have been offering the owner deep discounts because they're anxious to retain one of their few steady customers. Sounds like a recipe for a healthy inflow of cash, right?
Wrong! Sales have been consistent at $6 million a year, but the business is losing money by the fistful. Every year, overhead in each department has been creeping up, and the second-generation owner, a bright and dedicated woman named Alice, just can't seem to keep track of all the cash that's bleeding out of the business.”
Why the Boss Needs to Put Profit First by George Cloutier

Letterheads Inc should have tried using one of accounting’s simplest computations to identify potential areas to make improvements for increased profits – straight out of any accounting textbook:

Profits = (Sales – Variable Costs) – Fixed Costs

Profit = what you make from running your business, before taxes. However, since once you have worked hard to earn your profit you will want to keep it, so tips on debt structure tax help resources will be posted from time to time in future blogs. Of course if you are a corporation with shareholders… they will be very happy with increase profits too.

Sales = also called revenue. The sales figure used in this calculation is actually your net sales received after deducting customer returns, and customer discounts. Of course increasing sales will increase profit! Or will it? The CVP Calculation shown above is a quick way to determine which marketing plans will actually increase profit.

Variable Costs = these are exactly that. Variable. The total increases and decreases as production increases and decreases but the variable cost on each unit will always be the same. Of course decreasing Variable Costs will increase profits.

Variable Costs for manufacturing should at least include:
• Hourly wages paid to produce units
• Materials used directly to produce each unit
• Overhead:
---Shipping of materials and of finished product to customer
---Sales commissions
---Travel Expenses
---Utilities in building where product is manufactured
---Miscellaneous parts and lubricants used in manufacturing multiple units
---Special tools and equipment
---Cost of billing

OR

Variable Costs for retail/merchandising should at least include:
• Cost of purchasing units for resale
• Overhead:
---Shipping
---Sales commissions
---Travel Expenses
---Cost of billing

NOTE: Variable Costs for a service based business are similar to that of manufacturing.

Fixed Costs =this total works in the opposite way of Variable Costs. The total fixed cost remains the same no matter how few or how many units are produced. These are costs that remain the same each month and remain even if production stops. Therefore the more units produced, each unit will carry less burden of this cost. Yes... decreasing Fixed Costs will increase profits!

Fixed Costs should at least include:
• Mortgages, leases and rents
• Insurance
• Employee Salaries

WARNING: Of course it is important to make a profit. However do not fall into the trap of trading long term sustainability and longevity of a company for a quick profit even if bonuses are calculated by profit. Some companies make the vital mistake of cutting corners in research and development to the point designs lag. Others cut preventive equipment and building maintenance budgets so assets become antiquated or become damaged. Get the picture? Make wise decisions based on the company’s short term and long term strategies.

You are invited to comment on this information or tell us about your attempts to increase profit.