Do your company’s financial results prove its success? If you can’t answer that question, you have a great opportunity to increase the believers in your company. Specifically, believers that may provide you with financing.
Money is not everything, but it still talks. A business person who can show that their products or services are highly valued in the market will hold more influence in conversations with customers, investors, employees, and just about every other stakeholder.
Let me explain. Profit is a measure of value that consumers ascribed to your company’s offerings. The higher the profit, the more of your consumers’ hard-earned money they have surrendered to get what your company provides. If it’s more than that that of your competitors, you’ve proven that your company is more valuable. A more valuable company is one that can obtain funds at lower costs and has more credibility with consumers and prospects.
If your company sells services, are the margins on them higher than your competitors? There are ways you can use market research to find this out. However, the first question is, do you really know how much profit you make on each service? If not, that is where you need to begin?
There are two “levels” to profits: The top line and costs. The top line is revenue – what your customers pay for a product or service. That is usually easy to track, but if you offer discounts or other incentives, it can get a little tricky. The second piece, costs, are tougher. Most companies can, with a little effort, figure the direct costs of their offerings. The costs paid to a supper for materials in a product or the cost of the pay for an employee dedicated to a service or product is fairly straight forward. But what about indirect costs such rent, utilities, management time, follow up time and costs for errors or fixes, or just the extra time you spend with a complaining customer that could be used for serving another, perhaps higher-profit customer? We’ve all experienced customers that we think are just not worth the effort. But can you precisely identify which ones those are?
Having more influence with your stakeholders starts with knowing how much value your company brings to the market. If you don’t know that, you’re just guessing.
I would love to chat with you about this any other topic that can help your company be more successful.
Please don’t hesitate to contact me at SHAMROCK | CPA FINANCE COACH