10 strategies to improve your bottom line

Smart business owners do not wait for tough times to finetune the financial performance of their business. Building a healthy bottom line generates valuable cashflow and equity which can be used as a buffer or for business growth. My most successful clients set a profit target and work backwards from there, using these 10 strategies:

#1 Target your marketing spend

By understanding where your customers shop and what motivates them, you can be more selective with where you advertise and what content you provide. In New Zealand, spend on digital marketing has surpassed broadcast media and there is good reason for this: email, SMS, websites and social media are very cost-effective mechanisms for delivering personalised content that is easy and fast to respond to. The insights collected from digital engagement also enable the rapid refinement of future communications. If you would like to understand what areas of your marketing need improvement check out this free online diagnostic tool.

#2 Review debt and lending arrangements

With interest rates rising, talk to your accountant or banker about consolidation or refinancing loans and business credit cards.

#3 Query all costs

A good rule of thumb is if a cost adds no value to your customers, then it should be queried. Set aside time to review and where necessary, renegotiate the supply of inventory, utilities, banking relationships, professional services, insurance and administrative costs. Where possible, spread payments over time to smooth cashflow spikes.

#4 Only acquire good customers

If you understand what your good customers look like, you are well equipped to find more. Consider how they transact with you (spend amount, spend frequency, spend recency), alignment with your brand (do they value what you value), how responsive they are (they engage with emails) and whether they are advocates for your brand, products and services. Use this knowledge to actively prospect or advertise. Conversely, identify those customers that cost you money and don’t be afraid to direct them to your competitors.

#5 Improve productivity

The less time that is spent on producing a product or service, the smaller the gap between the cost of the inputs and receipt of payment for the finished goods. As we can only manage what we measure, put in place simple metrics to monitor turnaround times, and identify barriers and obstacles. Productivity is also associated with inventory or stock on hand. At this current time optimising inventory levels may be more challenging. I recommend you read this post on new approaches to supply chain disruption.

#6 Adjust your pricing

 Your pricing should be based on what customers value, the cost of production, your point of difference and what your competitors charge. Take time to review your three strongest competitors and rank your business and theirs using the attributes valued by your customers. Where do you need to improve, to justify your pricing? Most customers understand the need to increase pricing if external costs have gone up, as long as you provide advanced notice and an explanation. Also consider tiered pricing or multiple price points to upsell existing customers or get new customers to trial your products.

#7 Plan to succeed

Businesses can succeed without a plan, but they may not take the smartest route or it may take them longer. I am a fan of the one-page plan – one that outlines where you are now, where you need to get to and the strategies to get there. Wherever possible, I use quantifiable and realistic targets e.g. Debtor Days, Sales, Number of Leads, Gross Margin etc. This plan needs input from your team to be successfully delivered by your team, where people take ownership, responsibility and are held to account.

#8 Work smarter

Technology is the great enabler. It can make businesses more efficient as well as being a springboard for innovation. When thinking about efficiency and improving the bottom line, the key is integration – ensuring data flows between systems reducing processing time and errors.

#9 Fail better

While this has become a trendy term, as an accepted part of your business culture, it can make a big difference to the bottom line. In the process of aiming for excellence, there are always things that can be done better or learnings that happen along the way. Transparency and accountability help identify the root cause and rapidly transform those insights into better ways of working. As an aside, perfection should be avoided at all costs. Like people, businesses are organic and unique where perfection is an unattainable goal that contributes to dissatisfaction and inhibits innovation.

#10 Play the infinite game

The objective of the infinite game is not to win but to keep playing. As a business strategy it is about focusing on an ever-evolving vision and using it as a filter for decision making. It places emphasis on flexibility and creating an organisation that inspires other people to continue the game, long after you have left. By its very nature, this will direct attention to cashflow (the lifeblood of the business) and the development of activities that drive sustainability.