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How to ‘win’ in a market that isn’t growing

How Gibsons helped Pro Powder grow its profit by 600% in 10 months. 

Profit is the one metric that matters most, for nearly all businesses. There are a number of measures that each business should be keeping an eye on, but deciding which ones are more critical for YOUR business requires getting under the bonnet to find out what really makes it tick.

A thorough examination of a business’s operational processes, human resource function, sales and marketing activities, core value proposition and key business drivers is required. While many tried and true theories of business management can guide you on this, the reality is often more fluid, unexpected, and industry specific.

When you are completely immersed within the operations of a business, it can be difficult to see what is actually going on. You are in effect too close to the issues to see them clearly; especially if you, like many business owners, have fallen into the trap of doing too much yourself.

Our work with Pro Powder is a stark example of the great improvements that can be made when a business invites an objective and experienced third party in to help.

A powder coating business, Pro Powder was achieving a $1.4M turnover at the time they engaged with us, but profits were barely reaching the $20K mark. The company’s owner was stretched and feeling that so much hard work just wasn’t paying off.

Despite the company operating at full capacity, its profit margin was still too low to be sustainable without burning out the owner. 

Pro Powder provided our Senior Consultant, Graham Pridham, with full access to the business: its staff, operations and procedures. We assessed financial information alongside insights from discovery sessions, staff engagement and a review of business processes. Because of our extensive experience in supporting manufacturing companies, we could identify how best to support the company very quickly, saving discovery time.

Armed with practical solutions to ensure the team was fully utilised and with insights into more appropriate marketing and sales tactics, Pro Powder were able to invest more time in sourcing and targeting more profitable work. They were able to determine their “ideal” client profile to successfully reposition themselves; as well as focus on sales efforts and accountability.

It can be difficult for businesses like this to choose to invest in getting help when profit margins are so limiting, but the decision to do so can be empowering. The business is now positioned to do well, the owner feels on top of things, and the financial return on investment from third party assistance is very clear.

These are the results Gibsons strives to achieve for its clients, every time, no matter what their size at that time in their journey when they connect with us. We have helped countless businesses to grow and become more profitable, well beyond their own expectations.

Improving businesses is in our DNA.

Improving Profitability

One of the major concerns that shows up in surveys of business owners is how to improve and maintain profitability levels. Competition levels always seem to be on the increase and margins are continually being squeezed. The end result is that we work harder for less profit.

Here are a few thoughts on how to protect your profit margins:

  1. Know your numbers. Regularly measure how your business is travelling financially. Too often we find business owners who think that they are not capable of reading and understanding financial reports and use this as an excuse not to regularly review their financial position. Sorry, if you are responsible for a business, then knowing how it is performing is in your job description and it is not difficult to learn how.
  2. Use your financial reports. There is a goldmine of information in a Profit and Loss (P&L) report if it is structured to provide management reports rather than just as a means of providing input for a BAS or an income tax return. Your balance sheet can also help you manage your cash.
  3. Manage your gross margin. Your gross margin is the difference between what you sell something for and what it costs you to buy it or get it out of the factory ready for despatch. It will mean that you are managing your selling prices and input costs.
  4. Manage your selling expenses. Summarise your expenses into meaningful groups such as communications, vehicles, property, employment costs etc., so that you are looking at a manageable P&L statement. Set targets for each group relative to your revenue.
  5. Eliminate waste. The average amount of time spent value adding to a piece of raw material from the time it enters a factory until it is a finished item ready for sale is less than 10%. The rest of the time is one of the seven categories of waste identified in Lean Manufacturing theory. They all add to your cost and reduce profit margins, but none of them show up on your P&L. The concepts are equally valid for office environments. Understand what they are and work to reduce them.
  6. Hold your staff accountable. Develop a culture where people care about what they do so that they provide great customer service but are conscious of costs. Provide them with targets/budgets and outcome reports. Have a performance management system and a recognition and reward process that is linked to your values.
  7. Aim for continuous improvement. Implement formal systems to continually be looking to improve how you do things. The first time that you analyse a process for improvement you may be able to halve its cost, which may significantly improve profitability. The tenth time you may only be able to reduce it by a few cents per unit. Even though the slope of the improvement curve diminishes, we can always look to improve with a view to maintaining and increasing profit margins.

Improving profitability is one of the key tasks of the business owner or manager and will require time spent working on the business, not just in it.