There are four areas to focus on as you work to improve profitability in your business.
- Getting and keeping customers
- Creating a strong gross margin
- Controlling expenses
- Growing the business
The ultimate test of your business model is whether you can consistently and predictably get and keep customers. Without this function working well everything else will be a struggle.
Having strong gross margins is about selling at a price that provides value for your customers and a healthy gross profit for you. A strong gross profit makes it possible to sustain the other functions within the business.
Controlling your operating expenses is about keeping costs in check so you bring a solid percentage of revenues to the bottom line. It is difficult to survive in business without a constant focus on keeping expenses in check.
Growth is about scaling the business up and touching even more customers. Not every business needs to grow dramatically. But growth can be a very nice antidote to decline. 😊
At any given time, you should be working on one or more of these areas to improve your profitability.
Which area are you focused on this month?
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