Imagine you are a juggler with 5 balls in the air. This is something like what a business owner must feel when managing their business. Four of the balls are the same colour representing product, sales, marketing and people. All important for a business to survive and grow. The fifth ball is profit - the most important ball to keep in the air. Why? Too many people make the mistake of focusing on sales alone. You should never take your eye of the profit ball. Remember the saying; sales are for dreams, profits are for keeps.
Profit planning allows you to set the financial direction you want for your business, to achieve the best profit that you can and importantly gives you options! The purpose of a profit plan is to provide a goal for your business. It should be on the ambitious side to make you stretch out to win your goal.
The following story follows a family run business that certainly wasn't focused! Have a look at what they did about it...
This family run business has been in operation for over 10 years. The business has grown in leaps and bounds, progressively gaining traction in its industry. It is known Australia wide for its commitment to educating its customers. Although successfully growing sales, profit was non-existent.
To ensure all of the owner’s hard work was reflected in the bottom line, a Profit Plan was established, so that the family and key shareholders knew the profit the business needed to make for the year. As well as setting the profit target, key performance indicators were put into place to track the performance of the business.
Monthly Board Meetings were scheduled with family shareholders, key employees and Sullivan Dewing as independent external advisors, to review the business performance, challenge the business owners, and make sure the focus on profit was there!
The business has achieved its most profitable year yet with a renewed and absolute focus on making profit not just making sales. So, when you set your plan for your profit, make sure there is a healthy number on the bottom line!
For more information or help with your profit plan email or call one of the SD team on 9526 1211.