Top 5 Tips to Achieving Profitable Growth in Your Business

At a minimum, you must calculate your breakeven monthly.  Your critical numbers (like gross profit margin and fixed costs) are moving targets – because your business is fluid in nature, your key performance indicators are changing all the time, which means that your breakeven target will be slightly different each month.  Understanding these subtle differences is crucial to you being able to take effective and appropriate action when you and your team fall behind your monthly targets.

It is imperative to break the monthly breakeven target down into bite size pieces that can be understood by everyone and measured regularly – i.e. how much in sales must be generated per hour (or per salesperson) each day?  The breakeven target is only useful if you can track and measure it each day.  The bottom line is this, what gets measured in your business, gets improved.

If you are behind target at a given point during the month, resist the urge to spend money on mass advertising or put items on sale to increase revenue quickly.  Any activity that increases fixed costs or decreases your gross profit margin will raise your breakeven target and make it more difficult to reach.  Marketing costs adds to your fixed expenditures and discounting always decreases your gross profit margin.  Look for strategies that allow you to speak directly to your existing customers for very little cost – these direct marketing tactics (like email) are often very effective and inexpensive.  Aim to up sell complementary products, value add (insurance, resources, checklists or training) or introduce additional products that have a high gross margin and make it easier for you and your team to increase sales and the bottom line.  Ask yourself “what can we do to enhance the customer experience and add value so that price is no longer a determining factor in the purchase decision?”

Post the breakeven targets where all team members can view them and demonstrate that you are serious about measuring and reporting on profitability. Monitor progress every day toward the checkpoint, celebrate/reward the successes openly and follow-up quickly on any shortcomings or discrepancies. This will eliminate unwanted surprises at the end of each month and allow your team the opportunity to step up, meet and exceed your expectations.

It is simply not enough to [just] breakeven and cover costs each month unless you are a not-for-profit business.  If you are a commercial enterprise, you also need to set and strive for a breakeven plus profit target each month.  To determine what your breakeven plus profit target is for a particular month, simply add your desired profit to the fixed costs for the month and then divide that total by your gross profit margin. Then break the breakeven plus profit target down to a daily rate so that you can track it along with breakeven.

Calculating your break-even each month and more importantly knowing exactly which day of the month you break-even and cover all of your costs, will allow you to hit the sweet spot of your company and make informed, strategic decisions about how to achieve growth that is profitable for your bottom line and healthy for your bank account.  And that is the best way to hit an ace in your business.

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60 Responses to “Top 5 Tips to Achieving Profitable Growth in Your Business”

  1. Elmer Brensnan March 22, 2012 at 2:24 AM #

    Do you have more on this topic?

  2. Antoine Debell March 22, 2012 at 3:43 AM #

    I would bet 99% of business owners do exactly that – put stuff on sale in order to try to make up lost ground. Good advice. Measuring breakeven is so important and knowing what to do when you are behind…even more important.

  3. Carl breton March 22, 2012 at 3:43 AM #

    So true. Valuable and practical advice for any small biz owner.

  4. Anya Chamers March 22, 2012 at 4:06 AM #

    Your website shows up all over the internet, you must be practicing all the right things. Figured I would connect in and link to you.

  5. Bernice Davidson March 22, 2012 at 4:10 AM #

    Profitable growth is SO much better than just growth for the sake of it – with no more to show for it on the bottom line!

  6. Steven Middleton March 22, 2012 at 7:32 AM #

    #4 and #5 are perfect for me today. Going to share these with my team.

  7. James Fonster March 22, 2012 at 7:41 AM #

    Of all the things you’ve mentioned I coudn’t find any that I wouldn’t agree with:)

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    topnotch advice!

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    An original and practical post. Well done – I enjoyed it throroughly.

  10. Calvin Sanford March 22, 2012 at 6:53 PM #

    Know so many clients who just want to advertise and put stuff on sale in order to close more business. it’s hard for them to unlearn bad habits. 🙂

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  1. Max Tamworth - December 19, 2012

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