Cut Costs to Increase Profits
Posted on 20th August 2020 at 09:12
I have spent 35 years helping businesses to make a step change in their performance.
This is what I have learned…
It is possible for businesses to make 10% net profit even in sectors where ‘it can’t be done’. So how do they do it?
In this blog I will summarise some of the key things you can do to deliver similar results. In future blogs I will detail each element in the step change process together with examples from my clients’ experiences.
Firstly, let me deal with the role of the leader/owner/CEO.
I have found this is critical in the process of making a step change in profit performance. The successful leaders with whom I have worked have a growth, as opposed to a fixed mindset. A growth mindset relishes change and enjoys trying new ideas. Leaders with this mindset value success or learning from trying new ideas and experimenting. If things go wrong, growth mindset leaders look in the mirror and take responsibility for events not blaming external factors or other people. They ask what I can do to sort or change this.
A leader with a growth mindset has humility and the openness to confront the brutal facts in their business. This is not always easy; egos can get in the way…
A fixed mindset leader assumes everything is OK: “don’t need or want change”… they usually look out of the window to find a scapegoat or some other cause, outside of themselves or their business.
“Complacency is the first sign of potential business failure and not a loss of sales or margin”
Jim Collins, Good to Great
The good news is that if you can change your mind you can change your mindset. Experience shows that this can be done providing the prize is considered worth it
The better news is that if a leader has a growth mindset then making a step change in their business is possible.
You might like to assess your business against these factors. Be brutally honest in your assessment no point in fooling yourself. Score each question out of 10, 1 being low 10 being high.
Step Change Leaders Self-Assessment RATING: 1=low/10=high
I have a GROWTH MINDSET that really drives the innovation and change that we require.
We have a clear STRATEGY (mission, vision and values) that guides our key business decisions.
We have the RIGHT PEOPLE ON THE BUS who continually produce results beyond expectations.
Our REWARD SYSTEM ensures that all our people treat our business as if it were their own.
I have LET GO TO GROW and created leaders at every level in our business.
Our customer perception surveys show that we have created competitive advantage by DELIGHTING OUR CUSTOMERS.
Our BUSINESS GENERATING SYSTEM ensures we have the number of customers that we require.
We have no ‘silos’ TEAMWORKING across our business delivers extraordinary results.
We have refocussed our PRODUCT/SERVICE offer based on long term profit opportunities.
We spend time working ON as well as IN our business and this significantly improves our profits.
You could get your colleagues to also complete the assessment to see if you all have a shared understanding of your businesses priorities in your quest to create 10% nett profits.
These 10 steps to making a step change in a profit performance did not come from a text book but rather from working with some great leaders in great businesses. Here are some of the great leaders I have worked with who used the step change process to transform the profitability of their businesses.
Terry Bramall, the original majority shareholder and chairman of Keepmoat PLC, had a real growth mindset, encouraging others to think big and try new ideas- nothing was off limits. Keepmoat had a very clear strategy. Terry said, “If accountants were smarter, they would put our strategy on the balance sheet. It was a real asset.” Keepmoat managers were enrolled in a Ltip (long term incentive plan) which really engaged them in the business strategy. Cross business efficiency groups drove profit improvements on a continuous basis.
Paul Rice, CEO of Hugh Rice Jewellers, had a clear strategy which he used to make the key business decisions. Delighting people was the mission. Internally it built a positive performance culture, externally it created delighted customers and suppliers.
Paul has led 40 profit improvement projects over the past 18 months, which will really help the business deliver its 2020 vision. Dashboards have enabled all HR colleagues to focus on the key business priorities. Senior managers have been given shares in the business. Step Change has really helped to transform this business.
David Kilburn, Executive Chairman of MKM Building Supplies, has developed a transformational growth strategy. David has used the Step Change process with all his Branch Directors to improve profitability as well as to drive sales growth. Their dashboard system has enabled managers to identify and focus on the key issues in each branch. The Branch Directors have a share in the business, so they are fully engaged in running their branches as if they were their own.
These are some highlights of how client businesses have produced outstanding results. In future blogs, I will explore each of the steps in the process in more detail as well as sharing the experiences of those clients who have used them. Boom!
See the Cut Costs Improve Profits Toolkit in my new book Telling Tales
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