Sat. May 30th, 2020

Strategic moves to boost profitability in a tough economy

Profitability. All companies strive towards it. But it’s notoriously hard to attain and maintain – especially in a tough economic environment.

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Both Chartered Accountants and entrepreneurs, we asked the founders of Outsourced CFO how one can go about crafting a strategy for a profitable year ahead.

Making money is important, but business is
about much more than profitability. A successful company’s impact stretches
into meaningful job creation for many people, contributions to human welfare and
large-scale social impact. But no business can run at a loss indefinitely.

The only way to realise the full vision of your company is to build and keep it profitable. Taking care of yourself first in order to also be able to take care of others. But getting to and staying in the green is a big ask for any business in a tough economy. Luckily there are some simple to understand levers that all business owners can turn to in order to engineer better profitability.

Price increases

‘The first lever is to increase prices’,
says co-founder Dana Pretorius. ‘If you are running at a 10% net profit margin
and with all other things constant, a one percent increase in prices will lead
to a ten percent increase in your profit. That’s good leverage!  But how do you justify asking more for your
product and service in the new year?

Annual increases

Annual price increases across your client
portfolio makes a big difference. Most existing clients will be accepting of an
annual increase. Don’t miss the chance to roll this out annually to avoid costs
climbing faster that revenue.

Increase new acquisition prices  

Work hard at building your brand and
credibility. A stronger and more credible brand can charge much more for its
products and services than a lesser known and untrusted one. New clients will
expect and accept a higher price tag when coming on board with an established industry

Show clients love and value

In the absence of love and value, there is price. Sincerely connect with your clients. If you and your staff are truly passionate about the work you do and deliver value each time, price becomes much less of a talking point. Ensure that your sales and onboarding teams show prospects love and value each and every time.’

Volume increases

That sounds simple enough, right. Just sell
more. But the mix of factors that enable entrepreneurs to do so remains complex.
Co-founder Louw Barnardt’s best tips for increasing how much you sell?

Referral business is the best new business

‘Your existing clients are your ultimate
sales team. Firstly, make sure that they are very happy with what they are
receiving from you. Once you have that right – ask for referrals! All business
owners know a network of other similar business owners who can also benefit
from your offering. Referrals from someone trusted close much easier than cold
sales efforts.

Don’t underestimate digital

In this day and age, you have a massive
opportunity to create awareness and interest in your product by leveraging
digital. Social media, pay per click advertising, video and other online tools
can reach thousands of prospects long before your sales efforts can. Selling to
a prospect is a lot easier if they have already heard about you and have been
following your company.

Build an outbound sales strategy and systems

Don’t just wait for the phone to ring.
Identify platforms where you can find your perfect clients and reach out and
connect. Starting a relationship and offering value first will ensure that you
are not brushed off as another salesman. Be creative in your outbound efforts.

Keep delivering as you scale up

Getting new business in is one thing. Being able to scale your team, systems and operations to meet increasing demand is a whole other ball game. Apply proper scale-up methodology to your entire company to ensure that your people, systems and operations can grow as fast as your revenue.

Cost reductions

Co-founder Jacques le Grange shares his cost reduction thoughts: ‘The answer might not be to squeeze all suppliers and fire half your staff. Obviously, don’t be wasteful on expenditure. If you have applied steps one and two above, chances are that your income will be growing fast. Instead of cutting costs, try to focus on operational efficiency.

Identify breakdowns in your sales,
onboarding, delivery and recovery processes. Then bring in the systems to
smooth those over. Also keep investing in your people. Motivated, trained and
cleverly incentivised staff are a massive driver for profitable growth.

Lastly, do take a fine comb to your new
year’s cost budget. A detailed budget will ensure that you decide in advance
what you are willing to spend on various expense line items. This helps you to
be disciplined when tempting purchase opportunities come knocking.’

Final thoughts

Understanding how to increase your
profitability comes from a command of your numbers. You can only start
increasing profitability when you know what your current income, cost structure
and bottom line is. Make sure that you know your numbers ahead of crafting your

In a difficult business environment, it’s
even more important that you spend the time to carefully craft your strategy
for improved profitability. We see founder teams achieving exceptional growth
and beautiful profit margins all the time – in spite of the surroundings. It
can be done. It will just not happen on its own. Go out there and apply your
profit strategy with intent and discipline to make this new year your most
profitable year yet! 

Pretorius, Jacques le Grange and Louw Barnardt are the co-founders of CFO and
cloud accounting services firm
. They are listed among the
Most Innovative Companies in SA and the SAICA Top 35 under 35 Chartered

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