How do I increase profit margins and drive growth?


Your first step should be to create a business plan for the next five years with benchmarks for growth and profitability. Finding out average growth rates and margins for similar businesses in your industry will help you set realistic goals. The key is targeting the bottom line. If your company generated a 3.4% profit margin last year, try aiming for a 5% margin.

Gross margins, too, could be boosted. Look into buying groups -- businesses that make purchases together -- to cut costs. Also, you should make sure you’re charging premium prices for premium products. That means resisting discounts and negotiating aggressively with vendors.

Make sure your operating costs don’t rise with your sales. Expenses really should lag sales. One option is to cut your total costs in compensation and benefits, insurance costs, and interest expenses.

BENCHMARKS
All that means you need a chief financial officer familiar with financing techniques. Once your financial plan is in place, you should make a five-employee management team responsible for meeting benchmarks tied to their individual responsibilities as well as the company's overall financial goals. Consider hiring a president or chief operating officer to run the company's operations and supervise the team. There needs to be a layer between you and the managers so they have someone to go to for details.



Aldonna R. Ambler

chief executive of Ambler Growth Strategy Consultants

Albert J. Zdenek Jr.

CPA and chief executive of Zdenek Financial Planning