Techniques To Improve Profits
The question was asked, "How can I improve my net profit? Often there isn’t enough left over at the end of the month."
Large BSC's may have accountants on staff who provide detailed financial reporting. However, if you are a smaller business, you may struggle with analyzing your income and expense categories and reports.
It is important to crunch your financial data monthly and review your income/expense statements. It's helpful to breakdown your income into service types, such as janitorial, construction clean, carpet cleaning, floor care and any other service categories you provide. The basic formula to increase net profits is to increase revenues and decrease expenses. Here are some strategies:
- Increase revenues — The most obvious method is to kick-off a well thought out marketing program. Are there certain market segments where you have made inroads? Businesses such as medical, manufacturing, retail, or property management. That is the obvious place to start; where you are currently knowledgeable or successful. Are you maximizing all of your networking opportunities? Should you plan a post card mailer, telemarketing, direct canvassing, or an email campaign to deliver your value proposition? Can you diversify by offering additional services that you do not currently provide? Brainstorm to discover the best approaches for client acquisition, and make that a priority.
- Enhance profit margins — Mistakenly, many contractors believe they should never increase their pricing levels. However, some studies show that any customers who resist your price increase and terminate, will be more than made up by the extra profits that materialize across the board. Locate accounts that are not earning a fair return, and decide if you could increase the billing. Could you add more carpet and floor care services that run a higher profit to you current accounts?
- Improve productivity — Hopefully you track the cleaning production rate for every account (net cleanable square footage divided by average nightly labor hours). Benchmark comparisons will reveal problem areas. Can productivity be improved through efficiency training, the use of a consultant, or by adapting new processes and equipment?
- Reduce expenses — Make sure when you tighten the belt with an austerity program that it is not counter-productive. Closely evaluate the cause and effect before making spontaneous choices. Review each expenditure to determine if any are unnecessary.
Utilizing Key Performance Indicators (KPI) will help you plan your work and work your plan. With determination you must not allow distractions and constant fire-fighting activities to curtail your growth plans.
Gary Clipperton, President of National Pro Clean provides training, consulting, and materials for the cleaning industry. He can be reached at firstname.lastname@example.org.