Profit Planning Revs Up Results Part I
Revisit your Business Plan
It was a smart move, that so many of you slowed hiring and capital spending while inventories dwindled, according to NFIB’s Small Business Economic Trends - January 2009. Profits are impacted by overhead and your quick response to rein in costs is a big help in weathering a recession that still has months for us to work through.
It takes time for the economy to improve that’s true. But, if you wait it out with no strategy, you could miss out on future opportunities. You can profit even in a recession it just takes a step back to:
- Focus your mind.
- Redefine your plan.
- Seek out opportunities.
- Dedicate yourself to client retention.
- Surround yourself with supporters.
Now is a good time to revisit your business plan, which may not have been updated since you initially developed it. Don’t get bogged down in the document. Here’s what you can talk about. Ask your self the following questions:
Has my customer base changed?
Has my product/service offering changed?
How often/how many new customers have I obtained in the last year?
Do I have new competitors? Who?
Do I have more/fewer competitors? Why?
What are the current competitive threats to my business?
It is never a good idea to cut your price, even in tough economic times. If you do cut your prices, only do it for a limited time encouraging customers to “act now.” This should be a last resort effort. Look at two large retailers Home Depot and Macy’s. Both had sales and profit declines in the fourth quarter of 2008, but Home Depot’s results were much better than Macy’s “because [they] held margins by not cutting the price,” while Macy’s had terrible results due to across the board price cuts.
Look for businesses that you can partner with to cross-promote your products and services while sharing the costs. For example, a laundry mat offers free detergent with each washer load and the free detergent is paid for by both the owner of the laundry mat and the supplier of the detergent. The price was not reduced, but there is a unique incentive for the customer with a specific start and end date, which will get the customer to “act now.”
Planning your path to profit takes a small amount of time. SCORE is America's premier free and confidential small business mentoring service, available online at www.score.org. Ask SCORE (http://www.score.org/ask_score.html) for advice 24/7 or find a local office (http://www.score.org/findscore/index.html) near you.