How To Manage Margin and Profitability

Podcast Summary

• Understanding cash flow, controlling costs, and maintaining margins for business growth: Focus on hiring affordable yet quality team members, controlling costs, and maintaining margins to achieve business growth and increase revenue while ensuring profitability.

  Growing a successful business requires a deep understanding of cash flow, controlling costs, and maintaining margins to afford quality team members and increase revenue. Norman, a £1,000,000 plus business owner with 26 years of experience, shared these challenges during an insightful conversation on the Business Broadcast podcast. He emphasized the importance of hiring affordable yet quality team members, controlling costs, and maintaining margins to achieve business growth. Despite facing challenges, Norman's business is on track to reach £150,000 per month in revenue with a 10% net profit in the next year and aims for a £2,000,000 per year turnover with a 10% net profit after dividends. By focusing on these areas, business owners can grow their revenue while ensuring profitability.

• Expert James Sinclair shares his business survival strategies: During economic instability, stay informed, adapt, and learn from experts to protect and grow your business. Try James Sinclair's affordable on-demand coaching at Entrepreneurs University.

  James Sinclair, a business growth expert, encourages entrepreneurs to check out his YouTube channel and consider joining his Entrepreneurs University for affordable, on-demand coaching. He's written several books, including one called "The Dream Team," which is currently in the editing process. During a difficult business period, Sinclair went from 22 staff to 12 due to economic instability, and he attributes his survival to staying informed and adaptable. He emphasizes the importance of protecting your business during uncertain times and encourages entrepreneurs to learn from experts like himself. To try out his Entrepreneurs University, listeners can visit jamesinclair.net and enroll for a free two-week trial.

• Adapting to new opportunities during challenging times: Agility and innovation are crucial for businesses to thrive during uncertain times. Pivoting to new products or services and collaborating with suppliers can lead to increased sales and profits.

  Even during challenging times, entrepreneurs can adapt and find new opportunities. The speaker shared his experience of pivoting his business during the pandemic by producing sneeze screens and floor graphics, which resulted in £300,000 worth of sales within a year. Despite having fewer staff, they managed to maintain the same output and even increased profits by collaborating with trade-only suppliers and doing some printing in-house. This story highlights the importance of being agile and innovative in business, especially during uncertain times.

• Maximizing profits with a lean team for a £2,000,000 business: Focus on sales, strategy, and account management with a lean team of essential hires like a bookkeeper, financial controller, and potential addition of one or two team members in production and sales. Delegate tasks and maintain control to build a profitable business.

  Growing a business to a specific size, such as £2,000,000, can help maximize profits while maintaining a lean team and culture. The speaker shared his experience of growing a business from a team of 22 to just 2, focusing on sales, strategy, and account management. He emphasized the importance of having a clear goal and understanding the team size required to achieve it. For a £2,000,000 business, a lean team with a bookkeeper, financial controller, and potential addition of one or two team members in production and sales may be sufficient. The speaker also suggested delegating tasks, such as sales and follow-up, to free up time for managing the business. Ultimately, the goal is to build a profitable business while maintaining control.

• Streamlining sales process with proposal software and hiring more sales assistants: During the pandemic, a company had to focus on smaller contracts due to letting go of sales team. Proposal software and hiring sales administrative assistance could help bring in larger contracts by standardizing process and freeing up sales team for business development.

  The use of proposal software and hiring more sales administrative assistance could help streamline the sales process and bring in larger contracts for the business. Before the pandemic, the company was on track to reach a turnover of 2,000,000, but after the pandemic, they had to let go of their sales team and focus on smaller contracts with an average order value of £550. The sales assistants were doing as much turnover as the salespeople, but what the business really needs is someone who can go out and secure larger contracts. The use of proposal software would help standardize the process and allow salespeople to focus on bringing in larger contracts. Additionally, hiring more sales administrative assistance would free up the time of the sales team to focus on business development and securing larger deals. The pandemic forced the company to hit the ground running and focus on smaller contracts, but with the implementation of these strategies, the business could grow and reach its potential.

• Understanding Business Vision and Personal Goals: Having a clear business vision and aligning it with personal goals are essential for success. Controlling costs is also crucial to maintain profitability.

  Having a clear vision for your business and understanding your personal goals are crucial for building a successful enterprise. A great salesman could potentially earn millions working for luxury car brands, but not everyone shares that ambition. Instead, consider whether you want to work to live or live to work, and build a business that aligns with your priorities. Controlling costs is another essential aspect of running a sign writing business. Overlooking hidden expenses, such as vehicle maintenance, rework due to mistakes, or energy costs, can significantly impact your profit margin. It's essential to be aware of these potential costs and take steps to minimize them. Ultimately, having a clear vision and effective cost control are vital for any business, especially in an industry like sign writing.

• Effective cost control in printing industry: Maintain good client relationships for client-caused mistakes, prevent internal mistakes through training and attention to detail, optimize labor costs, and consider increasing turnover and decreasing costs by 10% to improve profitability.

  Effective cost control is crucial for any business, especially in the printing industry. Mistakes can happen, and they can be costly. However, it's essential to differentiate between mistakes caused by clients and those caused by internal factors. For mistakes caused by clients, maintaining good relationships is key, and it may be necessary to absorb the cost. For mistakes caused by internal factors, proper training and attention to detail can prevent them. Labor costs are a significant portion of the expenses in the printing industry. To increase profitability, it's important to optimize labor costs. By increasing turnover and decreasing costs, businesses can significantly improve their bottom line. The 10% rule, which suggests increasing turnover by 10% and decreasing costs by 10%, is a useful guideline. Ultimately, there are three ways to grow a business: selling more, charging more, or saving more. By focusing on these areas, businesses can effectively manage their costs and increase profitability.

• Choosing the right vendor: Price vs. Service: Focus on organizations prioritizing good customer service for long-term business relationships. Identify top 10 clients and work towards building connections.

  Maintaining a healthy margin is crucial for businesses, especially in competitive industries like printing. The speaker shares his experience of quoting jobs to three different vendors and choosing the one with the best price. However, he expresses sympathy for the predicament, as smaller businesses can undercut larger ones due to lower overheads. The speaker emphasizes that while price is a factor, good customer service and relationships are equally important. People are less likely to switch to a cheaper alternative if they value the quality of service and the company's cultural values. The speaker advises focusing on organizations that prioritize good customer service, such as charities, schools, and local authorities. Building relationships with these decision-makers is key to securing their business and growing the company. In the southeastern United Kingdom, where the speaker is based, there are numerous opportunities to target such organizations, and the speaker encourages entrepreneurs to identify the top 10 clients that could significantly impact their business and work towards establishing a connection with them.

• Building a strong brand and large business opens opportunities: Focus on building a large, scalable business with a strong brand for lasting opportunities and client loyalty. Control marketing efforts with a dedicated team and leverage personal branding to attract potential clients. Provide free incentives for long-term loyalty instead of discounts.

  Focusing on building a large, scalable business with a strong brand can open up more opportunities and create a lasting legacy, while providing value to clients through free incentives can foster loyalty. The speaker, who runs several businesses, emphasizes the importance of controlling each brand's marketing efforts through a dedicated team and leveraging personal branding to open doors to potential clients. While it's possible to succeed with multiple small businesses, the speaker personally prefers building something large and legacy-driven. Additionally, the speaker recommends providing free incentives to clients instead of discounts to create long-term loyalty.

• Providing free value-added services or products can build customer loyalty: Offering free value-added services or products is more effective in retaining customers than constant discounting. Focus on recession-proof and coronavirus-proof businesses that are loved, wanted, and needed.

  Providing value-added services or products for free can be more effective in building customer loyalty and protecting business margins than constant discounting. Norman, a successful business owner, shared his experience of implementing this strategy in his signage and childcare businesses. He also emphasized the importance of choosing businesses that are not only recession-proof but also coronavirus-proof, by focusing on those that are loved, wanted, and needed by the customers. Norman's Sussex Sign Company offers various signage solutions nationwide, and potential clients can contact him through sufficsigns.com. Overall, the conversation underscores the importance of understanding customer needs and expectations, and delivering value beyond just price discounts.