Increasing Profitability

5. Focus

5.1 Simply focusing management awareness on profitability can have a dramatic impact.

• Even if cashflow is your top priority, this need not be at the expense of profitability.
• Make sure all your employees are aware of the importance of profitability.

5.2 Understand the key drivers of profitability.

• Set and monitor performance indicators. The most commonly used key performance indicators are sales against forecasts, costs against budgets, gross margin and staff costs.
• Make sure they are the right indicators. Staff tend to work towards them whether they are good for the business or not.

5.3 Minimise the effect of distractions.

• Avoid unprofitable distractions. For example, one-off projects that do not play to the company's strengths or are individuals' pet projects.
• When managers must be distracted (for example, if you plan to float your company), act to control the impact.