This week, Susan Hayes, a financial training and business consultant www.thepositive
economist.com
based in Ireland, talks about increasing the bottom line, with practical examples for language schools and study travel agents.



Do you really know what influences the bottom line of
your business?

The famed 'bottom line' is the line at the bottom of the spreadsheet, the one that gives you the real picture. Money might be pouring in, but if you have nothing much left after costs, your business is in trouble – or at least languishing.

I see it all the time: too many businesses focus on revenue, but it is profit, money that remains after costs, that they should focus on. As a result you can be chasing opportunities and working yourself into the ground, and feel you're making great progress – until you look at your accounts and wonder why you have so little to show for your efforts...

All the tips below are strategies that I have used myself to grow my own business. Needless to say, to improve that bottom line you'll need clearly defined objectives, so that you know where you're going. To define those objectives, you need to know the exact answer these questions:

What is your most profitable product or service? Since that is where you'll need to channel a commensurate amount of your effort and resources, you need to find out your most profitable products or services.

This sounds obvious, and still you'd be surprised at the number of businesses who either don't have any clear idea.

Remember to factor in marketing and selling time. If a summer course brings in £60,000 and costs £20,000 to run, at first sight it creates £40,000 in profit. However, you also need to factor in costs like the £10,000 you spent on advertising, media and staff to bring in that revenue.

Another product might 'only' bring in £20,000 in profit, but it represents repeat business for which you have very little selling to do. As a result the real profit is much higher. On this ‘like for like’ basis, it may be the case that growing this business line is going to be much more effective for your company than setting up new, more expensive ones?

Lose or make structural changes to loss-making businesses. That's a corollary of the previous point: I can't count the number of times people have told me that they were shocked to realise they were actually making a loss on a very successful product.

Too often they think it's just a matter of trying harder and bringing in more money: the trend will certainly be reversed at some point, won't it? But if you have twenty more contracts than you have today, and they're all making a loss, you're only going to be twenty times worse off. Bringing in more business doesn't necessarily mean that it's doing anything for your bottom line. Consider each of your products and if it's making a loss, get rid of it or else make a structural change in the cost of the inputs or increase the price.

I'm not talking here about discontinuing activities that might cost a bit of money but actively contribute to the bigger picture. There might be one specific event that you organise in relation to your summer course, and that event costs more than it brings in – but students love it and they would be less likely to attend the summer course if you dropped it. So when you look for loss-making activities, make sure the way you calculate profit is accurate for your business, and don't forget to factor in wider returns on investments.

By losing loss-making lines in your business, you will free up resources to channel towards the profitable parts. But if you don't, these resources may continue to be unwisely used to prop up an inefficient element of your business.

Go back to your existing customers and increase the size of the sale. By looking for repeat business, not only can you decrease selling costs (via lower marketing spends), but you can also increase the sale. If your customers were very happy the first time round and continue to have a need for your service, they may be delighted to do business with you again. There are many ways to get back in touch, so make sure you have systems in place to regularly contact previous customers e.g. a regular newsletter with updates and testimonials, a sales-focused e-mail to announce new programmes, a targeted Facebook campaign, a phone call at a suitable time etc.

If you're not quite sure what to offer past customers, how about simply asking them for feedback on their previous experiences and what you can do for them in the future? Always think in terms of what additional things you can offer that would be truly add value.

Once you have ascertained :

- which products or services are more profitable

- which products or services are making a loss

- how to go back to previous customers;

You will be in a much better position to set very specific objectives:

- grow a profitable offering or product or service

- set up a schedule to get back in touch with past students and
their parents

- spend more time building the most profitable business activities

These specific objectives translate into concrete action steps which can help you make 2015 your very best year yet.

Susan HayesCulleton is MD of international financial training company HayesCulleton Ltd. For actionable ideas you can immediately implement to grow your business, register for her monthly newsletter. 

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