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Profit improvement

Profits are vital for your business’s continued success, because they enable you to achieve your strategic goals; attract investors, lenders and customers, as well as lower the impact of socio-economic changes on your business.

Profitability is closely linked to cash flow and depends on the robust control of revenue and costs.

We work with you to determine the key drivers within your business and any seasonality that may have a direct impact on your profits. Based on this knowledge, we develop a clear and measurable profitability strategy, assist with its implementation, and help monitor its progress towards achieving the key milestones.

How WMT helps

Our profit improvement advice focuses on:

Pricing strategy, including the impact of discounts;
Identifying performance drivers and analysing trends;
Improving your processes;
Assessing your current market position and exploring additional opportunities;
Looking for ways to maximise the value of assets and overheads in your business;
Developing or reviewing your forecasts and financial model;
Strategic and operational planning and budgeting;
Setting up your management accounts to help you monitor performance on a regular basis;
Considering and resolving tax implications.

Our specialist advice will help you focus your energies on the right targets. You will be able to measure your performance and fine-tune your activities with precision to increase both the profitability and net worth of your business.

Get in touch to find out more about how we can work together to improve your profits.

What is the best way to improve profitability?
In essence, there are just two ways to improve your profitability. One is to reduce your costs – direct, indirect, fixed or hidden. The other is to increase your revenue.

Of course, the best route to profit improvement for you and your business depends on several factors including your businesses goals, your current situation and the timeline you have for achieving the desired change.

In terms of reducing costs there are a few basic steps you can take to get started, but in our experience, most SMEs have learnt how to manage the obvious costs effectively themselves. Ultimately, a cost reduction strategy can only go so far without having a detrimental effect within the business or on quality and service. A more effective and sustainable approach can be focusing on managing out waste – wasted resources, wasted time and ineffective processes.

In terms of driving up turnover, one of the ways we work with clients to increase profitability is to understand what we call the “Revenue Model”. The Revenue Model looks at the constituent parts of the income stream(s):
- The average transaction value – and how that can be improved
- The customer base – and understanding how that grows and churns over time
- The transaction frequency – and how that can be increased
Once these areas are analysed and understood, clear KPIs emerge that can increase margins and revenues. Other effective strategies for improving profitability then also flow from this analysis; how profitable is each product and/or service? How profitable are each of your customers?

Often the biggest profit improvement challenge for business owners is finding the time to think about it in the first place. If you find yourself in this position, external support could provide the answer.

We will help you gather and understand the numbers, put together a financial model for your business and create a practical goal-driven plan that delivers.

Do you still have questions? Get in touch with our business consulting team to find out more about how they can help you.
Who should be involved in improving profitability?

Setting goals for profit improvement, agreeing broad strategies and deciding which of the areas you are targeting is largely a management level activity. You and your management team know your business and, either on your own or with external support, you will be in a good position to set the vision.

Once you have a clear idea of the vision, all team members can have a good idea about how to increase sales or margins. Involving a cross section of staff at an early stage will make your plan more robust and easier for your staff to understand and follow.

Cutting costs can be perceived as a threat by team members so communication is the key to engage your whole team in improving profits.

If you are a busy business owner or manager, you should think about the value an external facilitator can bring. You could buy-in experience and expertise that you may not have in house and reduce the disruption to your day-to-day activities whilst you get the project up and running.

WMT can help you to stay on track, measure your results and adapt your plans when priorities change.

Do you still have questions? Get in touch with our business consulting team to find out more about how they can help you.
How can a financial model help me?

Business plans formalise the goal of an organisation and, if they are prepared collaboratively or shared creatively, can engage teams and individuals in achieving those goals. But how realistic is the plan?

Financial models from WMT help you with:

Testing your plan on paper – before you commit resources to delivering it.

Forecasting – by using multiple data sources from across the business to predict financial outcomes such as production capacity and debtor days, to expected incomings and outgoings, plan future investments and predict shareholder returns.

Testing scenarios – such as how will your business finances be affected by opening or closing a site, acquiring a new business or increasing sales? This will help you choose between options.

Planning capital expenditure – your financial model will help you decide if the investment will be worthwhile for your business and when to time the investment.

Calculating the true cost of projects – by gathering data from multiple sources.

Fundraising or preparing to sell your business– a robust financial model, especially one you have worked with over a number of years, will give confidence to potential investors or buyers.

Mergers and acquisitions – estimating the performance of the new business.

Do you still have questions? Get in touch with our business consulting team to find out more about how they can help you.
How long will my financial model be useful to my business?

Your financial model will be designed to incorporate multiple variables that, together, help you predict outcomes for your business. As your business develops, your marketplace changes, and you gather new information, your model can be adapted to improve its predictive ability.

With regular updating a periodic review of its underlying assumptions, your financial model can support your decision making throughout the business’s lifecycle.

Do you still have questions? Get in touch with our business consulting team to find out more about how they can help you.
What is the ‘revenue model’ and how will it help me?
The revenue model establishes the bridge between financial performance and the non-financial inputs of a business.

It highlights the best ways to grow and develop your business by breaking down the turnover into 2 elements:
- Volume – the number of customers, the frequency of transactions;
- Value – average transaction value.
Building a revenue model for each element of your business enables you to obtain meaningful information and avoid erroneous conclusions.

The effectiveness of the revenue model lies not in producing ‘the numbers’, but in how the information is interpreted and what decisions are made. When used as an ongoing method of assessing business performance, it allows you to identify important trends, and see if the action taken makes matters better or worse.

Do you still have questions? Get in touch with our business consulting team to find out more about how they can help you.

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