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Profit development

05 April 2009

Working as a business coach and mentor in the Midlands and London, one of the areas that business owners and directors is that profit developemnt and retention is about having the right people and the right systems in place. The wrong type of people in the wrong job or wrong systems will allow profit to seep away. This article identifies over thirty ways that profit can disappear where directors should be keeping track of what is or isn’t going on. Please be aware that this list is only the tip of the iceberg, as there are many more.

After reading this tip sheet, you will:

  • have a starting point for looking for that elusive profit that seems to evaporate
  • good idea of the types of questions that you need to get clarification for when developing profit strategies
  • understand the importance of KPI’s for different departments and how they merge together be able to delegate areas to staff that will keep them on their toes
  • develop new systems that will help you reduce profit leakage
  • recognise bad pracitise that allows profit to disappear

Profit Leakage

Where does your business spend, or waste money needlessly……?

  Trait/Area Behaviour Result
1 Paternalism Too soft Keeping unproductive employees
 2 Nespotism Too family orientated - not performance orientated Hiring family members, paying them too much and not getting value for money
 3 Low Morale Poor communicator  Due to inadequate salaries, poor working conditions, lack of communication and low benefits
 4 No Training Selfish or old fashioned No Staff development programme
 5 No Cash No cash flow management Debtor days too long, crediotr days too short, poor sales, margins too low, someone with fingers in the till
 6 High stock levels No planning Poor monitoring system and lack of purchasing controls
 7 Lost Discounts No negotiation, too naiive Paying late or missing deadlines
 8 Advertising No Marketing strategy Wrong advisers, wrong media, wrong message
 9 Credit Losses Too desperate for salses, too soft on customers Poor credit ratings, too trusting, desire for customers too high
 10 Incorrect Products and Services Living in the past, old fashioned Selling what you think your customers ought to have or what they want to buy
 11 Slow Marketing Frightened of change Old products, poor pricing, in wrong place, old style thinking
 12 Erroneous Accounting Weak control or too busy or both Abdication of figures, poor book-keeping, old fashioned accountants
 13 Missing information Too much talking, no management systems No management accounts, lack of information/feedback meetings with staff
 14 Outdated technology Dislikes change, no cash for improvements Old phone systems, slow computers, no backup, old/pirated software, cranky faxes, no email, no website
 15 Poor communication Headless chickens Piles of paper, fear of new technology
 16 Overpayments Lack of control and maangement systems Overheads not being monitored
 17 Poor Purchasing Poor delegation, lack of management understanding Lack of training and systems, to get keen prices and service for products, services, utilities
 18 Excessive benefits Selfish egoistical management  Overpayment of fringe benefits and high management costs
 19 Travel too much Too much ego tripping Lack of planning of sales visits, poor use of video conferencing, desire to get out of the office,
 20 Company Cars Too much image chasing Costs not controlled, mileage too high, too many petrol heads with large egos
 21 Travel costs Ego problesm, lack of KPI's Mileage rates too high, use pre-booked trains
 22 Expensive trappings Selfish management egos Costly maintenance of image and location
 23 Overstaffed Lack of controls, too soft, not enough management Owner too soft on staff and unable to ask staff to do more, owner/manager does work themselves
 24 Inefficient Staff Lack of managament Too many “one baggers”
 25 Poor location Lack of planning and thought Difficult for customers, staff and suppliers to get to you and for you to get to customers
 26 No Business Plan Lack of planning and management thought Not following it, or poor or non-existent plan, too much reaction, no strategy
 27 Over borrowing No business plan, lack of vision, no time, too reactive Too much risk, over trading, high stress, too much debt, trying to grow too fast
 28 Excessive withdrawals of earnings Too selfish, lack of ethics, lack of cash flow understanding, Owners or directors taking out too much from the business causing cash flow problems
 29 Poor Staff Compensation Selfish management Underpaid, do not have the best, just the rest, complaints all the time, no passion or creation
30  Differing Personal Values No Shareholder agreement Owner and staff working flat out to achieve different things like product perfection, “designer” dream, volume, giving the customer everything they ask for
 31 Lack of confidence Poor recruitment policies, no training People (key) unable to tell the boss/their boss the truth
 32 Not enough time   Always involved “in the business and not on the business”, doing not thinking and planning, too much work ethic, not working harder not smarter
 33 Delegation   Abdication instead of delegation


Paternalism Keeping unproductive employees