Profitability

software consulting, custom reporting, financial resources

Articles:

Credit Card Transactions

Entering Fixed Assets as Journal Entries

Estimating

Estimating-At-A-Glance

Estimating, Project Management Overview

Paying Liabilities and Transfers Between Accounts

Payroll Overview

Profitability

Proposals

Profits - Strategies to Improve

Responsibility As A Motivator

Risk Management

Schedule Variance

Take Your Business to the Next Level

Teamwork As A Motivator

Time Management

Time Management Matrix

Timetable of Procedures

The Balance Sheet, Part 1

The Balance Sheet, Part 2

The Balance Sheet, Part 3

The Balance Sheet, Part 4

Training Saves Money

Value As A Motivator

Year-end Close

Profitability is affected by almost every aspect of a business in one way or the other from the negotiation of a contract to the number of paper clips used in the office. Almost every business decision will affect profits either in the long or short term and it is management’s job to evaluate every decision based on its impact on both long and short term profits.

Managers are often too concerned with short term gains to carry out long term strategies that will allow for greater profitability. In the following discussion, we will show that short term decisions to increase profit can cause long term losses.

Sales and marketing: There is an old adage that something is worth whatever you can sell it for, no more and no less. The price we set on our contracting services is affected by a number of factors:

a) Market conditions: if there are other contractors who will perform the same services, prices may be dictated by the market. On the other hand, if you are one of the only people who can perform a task, it is much easier to set your own price.

b) Reputation/Name Recognition: if we have a reputation for integrity, quality and service, we may be able to command a premium for our services. The building of a reputation is a long term job that can be accomplished only with consistent effort.

c) Risk: if we are willing to take on risky jobs for a fixed price, we deserve and can often command a higher profit.

d) Quality/Service: if we provide better product or service, we may be able to command a higher price. What is important here is the perceptions of the buyer. If the buyer does not perceive the value of additional quality or service, they are of no value to the sales conversation.

e) Repeat Sales: it is often said that it is much easier to sell to a previous client than to a stranger. It is also true that a former client can have a greater appreciation for the extra service and quality that you provide. Selling additional work within a contract can often be more profitable than selling additional work to a new client.

f) Marketing planning: Too few companies take the time to develop a regular marketing practice that they can carry out every day. They are usually reactive marketers, putting a lot of energy into selling when work is slow and stopping entirely when they are busy. The establishment of a long term plan that can be acted on every day is the only way to even out work demand and be able to anticipate slow periods.

g) Professional Alliances: Developing long term professional relationships with the people who can refer business or assist your reputation should be a part of the marketing practice of every company.