Small Business Success | Small Business Mentoring

Written by Byron Lund

1. Eliminate waste

Eliminate reports, habits, products, duplicate input, and processes that waste time and money. These drain labor, money and energy from the business.

Two-thirds of products or services sold incur more costs to produce than they are sold for. These are a drain on profits. These losers can be reduced by either increasing prices, reducing direct costs incurred in producing the product or service, reducing overhead costs allocated to the products or services, or discontinuance of selling of the product or service.

Some of these profit robbing costs may be found through asking employees for feedback on duplication of efforts, unused reports, and other wastes of time or money, or through cost accounting or other analysis systems.

Eliminating waste increases the amount of space, labor, time, energy and money available for other profit-making activities.

2. Reinvest a portion of the savings in profit-generating activities.

Once the waste reduction frees up money, time, labor, space and energy, invest part of the savings in continuous improvement.

Some of these continuous improvements are already in most company’s budgets. Equipment replacement (depreciation), marketing, training and research and development are all current cost or expenditures to generate future profits.

An analysis of return on investment of discretionary expenditures should find further areas where the investment will yield results. Investment should be made in a combination of projects with short payback periods and those with high rates of return.

Other Articles and Shows You May Like

• Sales are Up and Profits are Down? When faced with declining profits, most businesses respond with increased sales. Their thinking is that there is a direct correlation between the two. Increased sales means increased profits, right? Wrong. When Furniture Brands International Inc., the largest furniture maker in the world, posted fourth quarter sales for 2003, at a glance, sales increased four percent from
• Recession – Top 5 Things to Do in a Business Recession The recession is firmly on everyone’s doorstep ready to come into your business. If you read the news or watch television you can see that the business side of the recession is accelerating faster and faster. It seems that Money and CNN have a new story every day on how the recession is impacting businesses
• Finding and Keeping Hidden Net Profits in a New Car Dealership Service Department By Ray Branch, President and CEO, The KEEPS Corporation Managing a new car Service Department while producing a 20% Net to Gross Profit ratio is not a simple task. This article will outline one (of about 14) key ingredients that must be in place to truly maximize net profits. 1. Customer Pay Effective Labor Rate Daily Management First,
• How Discretionary Spending May Effect a Business Valuation Written by Byron Lund Discretionary spending is spending that must be done for the long-term profitability of a company, but may be postponed from the current period (s). This includes equipment replacement, equipment upkeep (often referred to as repairs and maintenance), marketing, research and development and training. Discretionary spending may be expensed in the current period (as
• Employee Retention – An Employer Hero in the Recession By Ross Blake Although the television networks bring more devastating news about the economy every night, we also need to be aware of employers and employees who are making beneficial, even heroic, efforts to help each other and the economy. Here’s an outstanding effort by an employer which will motivate and retain good employees while reducing