Bigger and break-even or smaller and more profitable? Which would you prefer?
As a business adviser I spend most of my time discussing business strategy with clients – how to grow their business and increase its value. It’s also the subject top of our agenda at Roffe Swayne when our leadership team meets.
I have lost count of the number of conversations which start: we are working harder, sales are growing but our costs, particularly staff costs, are increasing and our profit level has fallen.
What would they rather have – a smaller more profitable business or a larger less profitable business?
The first questions I then ask are:
What do you want to achieve?
Which products and services contribute most profit?
What is the lifecycle of the products and services?
Have you got the right people to drive the growth?
More often than not I am met with blank faces because the directors have a hunch as to the answers but they don’t have the management information to know with certainty.
How do we help?
We start by improving the management information including getting accurate relevant timely information. This enables us to value the business today. We then make sure that everyone knows which parts of the business are profitable and which aren’t and identify the key profit and value drivers. Management then make strategic decisions about where efforts should be focussed to increase profitability and capital value.
Management focus on the right things to do now and over the next 12-36 months.
We keep in contact throughout the year and reassess outcomes of their actions and revalue the company at regular intervals.
No 50 page business plan and endless action points – but clear management priorities smarter working and increased profitability and capital value.
Post by Sharon Ward, Partner