It’s very common for strategies to get stale. As a result, over time, your profits begin to shrink. Business as usual just doesn’t work as well as it once did.
But it’s daunting to consider changing direction. Your current strategy is comfortable and it’s gotten you this far. Why change? If it worked before, it should work now, right?
Many business owners think they can just revenue their way out of low profitability and use the same old solutions to try to recreate the glory days of the past.
The thinking usually goes something like this:
“OK, so I’m making 2% on $2M in sales. That equals $40,000 of net income. If I can just sell more, maybe expand my products or open up new locations, I’ll make more money.”
The best case scenario is that it works in the short term. Unfortunately, it’s not sustainable. You can’t keep selling more and more low margin products and services and expect to make more money – you just end up making less of more while your costs go up to support the greater sales.
The worst case scenario is you can be successful raising revenues but completely eat up your profits in the process. No one ever intends this, of course, but it happens. And every year, businesses go under using just this line of thinking.
Don’t let that happen to you.
Here are some suggestions for finding a more profitable growth strategy:
- Get clear on your vision. Know where you’re going and why. If you’re not clear about where you’re going, how will you be able to make decisions along the way?
- Identify your most profitable products and services. Stop trying to grow low margin offerings.
- Make sure your vision is based on where you’re making the most money and what’s valued most by your customers.
- Start asking better questions. Think in terms of… What it’s going to take to get us there? What would need to happen to make this a reality?
- Isolate initiatives that grow sales of higher margin products and services while lowering costs.
If you’re unsure of where you should take your company in order to grow profits, don’t worry – you’re not alone. Strategic planning is designed to help you through this very process. If you’ve never participated in this kind of planning before, I highly recommend it. It’s much more than just a SWOT analysis and it’s a proven tool to help you grow and sustain healthy profit levels.