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Increase Profits – Develop a Marketing Plan

Nov 12, 2013

In many situations, increasing sales will help a customer increase profits.  A good start is to develop a marketing plan and then carry it out.  Before you develop a marketing plan, you need a sound business strategy and a sound marketing strategy.  I will talk about these in a later post.

For small and mid-sized companies, a marketing plan is a specific document that outlines the actions to be taken to market a single or set of products or services.  The plan needs to be very specific and include: Target Audience, Service or Product Areas, Approach, Contact Target Title, Methods, Resources, Actions, Dependencies, Responsibilities, Timeframe, Priority, Measures of Effectiveness.  Everything needs to be nailed down so it can be carried out by the named resources, in the specified priority and timeframe.

When well conceived and executed, a good marketing plan will focus the company resources on increasing sales and help achieve the desired result.

Increase Profits – New Fixed Price Service

Oct 30, 2013

I have been talking for the last several weeks about how to identify the 3 most effective actions to improve profitability and the role a financial model could play in this.  In order to make it easier for our clients to take advantage of our assistance in identifying the most effective actions to improve profitability we have just announced a new fixed price service.  The service includes performing the following:

  • Develop a Financial Model
  • Perform Sensitivity Analysis
  • Identify the best actions your company can take to increase profitability

This will allow our customers to eliminate the uncertainty about the cost of identifying the 3 most effective actions to improve profitability for it can now be done at a low fixed cost.  This new service fits into the Apollo 3 Step Profit Improvement Program.

In future posts I am going to discuss the methods that can be used to increase profitability.

Apollo 3 Step Profit Improvement Program

Oct 30, 2013

Do you want to increase profits?

The Apollo Consulting Group LLC has devised a uniquely effective three step profit improvement program.  It is the fastest way to increase profitability at your company.  The three steps of the program are:

  1. Identify the Most Effective Actions to Increase Profitability. (click for more details)
  2. Devise and Execute the Methods to Increase Profits. (click for more details)
  3. Measure the Results.

The process starts with a free no obligation consultation.

Call today or use the reply box above to arrange for your consultation and to learn more about how the Apollo 3 step Profit Improvement Program can increase the profits at your company.

Increase Profits   

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More on Identifying the Best Actions to Take to Increase Profitability

Oct 22, 2013

In my last two posts, I have talked about using a financial model to identify the best actions to take to increase profitability.  This is generally achieved by running sensitivity analysis on the model.  Sensitivity analysis is performed by running a series of what-if scenarios.  In each scenario, one or more actions are taken to increase sales or decrease costs.  The results are evaluated to identify which actions have the largest positive increase in profitability.  Then the results are evaluated for the feasibility of implementation.  Some actions are typically eliminated due to constraints of staff or cash.  The results can then be discussed with senior staff and actions can be taken.

So what insights have been gained by real companies by using a model?

For a multi-location day care provider, the model showed that the key to profitability was to increase capacity utilization.  When running the day care, almost all of the costs were fixed no matter how many customers they had on any given day.  If a lot of people came in, it was highly profitable because the revenue was much higher but the costs were level.  If they had few customers, the location lost money that day.  This led to pricing changes so that customers had a significant incentive to sign up for a monthly service rather than a day at a time.  Even though the monthly service was discounted, and provided the lowest cost per day to the customer if used for each weekday, it provided much greater revenue.  In addition, the daily price was raised to discourage drop-ins. In this way the pricing was set up to incent customer behavior to be consistent with the cost of doing business.

For a manufacturer of custom designed goods, the model showed that many customers were unprofitable.  This led to an analysis of the characteristics of the profitable customers and orders.  Specific actions were then taken to find more of the profitable type of customers.

For an E-tailer, the model showed that increasing sales volumes would not increase profitability.  This was the case because the markup over cost was too small to cover all of the costs.  As costs were already as low as feasible, this led to changes in strategy to change the product mix to include more products where a higher markup was competitively feasible.

In each case, insights were gained that were not readily discernible without the model.

Increasing Profitability Guided by a Financial Model

Oct 14, 2013

Once you have a financial model in draft form, it is important to verify that at current sales levels, the level of profit produced by the model closely matches the actual profit.  You should also run some what if kinds of scenarios to be sure the model is producing results that make sense and are of the right order of magnitude.  In a what if scenario, you change something such as the markup on goods, or the sales volume and see how profit is affected.

What kinds of questions do you want to ask?  In general, you want to change things that are in your control and see the effect.  You are looking to find things that have an oversized impact on profit.  For example, you might increase advertising and see an increase in sales.  The model might show you one of three outcomes: (1) Profit is increased significantly, (1) profit is unchanged, or (3) profit is actually decreased.  In the first case, you can then focus on increasing the general sales level and grow your way to higher profitability, spreading your costs over a larger sales base.  If you did not increase profits, it is probably that the cost of increasing sales is very high or that your profit per unit sold is at a low level.  In the third case, your cost of customer acquisition is high or you might actually not be making any money on a per unit basis on what you are selling.

If the model showed that you did not increase profits, you want to be smart here and try to increase sales of your most profitable items or increase sales to your most profitable types of customers.  This of course requires you to identify which products or customers are most profitable and why and build it into the model.  You might also think about new lower cost sales channels, more effective advertising approaches, etc.

What other questions can you try to answer with a financial model?  The list is long but here are some to consider:

 

Should I hire more sales people?

Should I increase my retail store space or production space?

Do I need to cut costs?

Should I begin production or start selling a new product line?

Should I drop a product line?

Should I raise or lower prices?

What can I do to have the greatest impact on profitability?

 

In general, any business decision you need to make is likely to be easier and more informed when gaining the insights the model can provide.

The most valuable thing to gain from a financial model is to learn what are the best actions you can take to increase profitability.  More on this in my next post.

What is a Financial Model?

Oct 08, 2013

I talk a lot about financial models because they are very useful.  So what is a financial model?  In its simplest form, it is a set of formulas that together represent the relationships between all of the revenue and cost components of a company.  For example, it shows the cost of fulfillment of each order, the cost of production for each product, etc.  Its output resembles a company income statement.  The really tricky part of constructing a model is to separate out all of the cost components and relate them to the revenue items while accurately identifying the costs that truly vary with sales and those that are truly fixed.

Most business owners think of their fixed costs as the costs they have to pay for each month, their cash flow “nut” so to speak.  In many respects this has little to do with the costs that vary with production or service volumes that are needed for a financial model.  Most small and mid-sized companies typically have little cost that is truly fixed.  Even office space or factory space is only fixed in the short run.  Given a little time, a company can take more or less space by moving.  Also, a given size space can usually accommodate a range of volumes of business activity.  This means that the cost per unit of production attributable to space will be highest at the lowest volumes for that space and lowest for the highest volumes for that space.

As another example, separating out how costs such as product design relate to the number of products offered, and the number of products offered relate to sales volumes is actually quite complicated.

At the end of the day, most costs vary with revenue volumes and successful modeling identifies and incorporates these relationships.

Identifying the Best Actions To Take to Increase Profitability

Oct 04, 2013

The most common request I get from prospective clients is to tell them the three things they can do to most improve company profitability.  Of course, to answer this question, it takes a bit of analysis and a good understanding of a given company’s underlying economics.  One approach is to develop a financial model of the company.  Then what if analysis can be performed to see what actions produce the best results.  These results can then be evaluated for feasibility within the resources available to the client.

I have been building financial models on and off for the past thirty years.  What I find intriguing is that each is unique and it is hard to predict the results at the outset.  However, I can tell you that each one was worth its weight in gold.  More on this topic in future posts.

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3 Most Effective Actions To Increase Profitability

Feb 14, 2013

Do you want to know which 3 actions will be most effective at increasing profitability at your company?

Sometimes, the best actions involve increasing specific kinds of revenues or getting more of a company’s most profitable type of customers.  Other times, the best actions involve finding efficiencies or optimizing product or service pricing.

The Apollo Consulting Group LLC is a business consulting organization that works with small and medium sized companies to improve profitability and cash flow.  Apollo can identify the 3 most effective actions your company can take to increase profitability.

To minimize your risk, Apollo will perform this service at a fixed cost to you.  Apollo will perform the following:

The process starts with a free no obligation consultation.

Call today or use the reply box above to arrange for your consultation and to learn how Apollo can identify the 3 most effective actions your company can take to increase profitability.

Increase Profits   

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