Some time ago, while I was analyzing a client's campaign, I had a revelation related to the importance of profits in companies and what is needed to have significant profits.
I realized that there is a key strategy that will help you increase your profits, but to do that you need to carry out different measures, according to the level your company is currently at.
Before talking about that, I want to tell you that there are two important metrics that are taken into account when evaluating a company: The sales it has and the profit percentage it generates from these sales.
The profit percentage is calculated according to what remains after covering expenses with sales revenues. This means that the profit percentage is the percentage that remains as profit after using part of the revenues for necessary expenses.
It is recommended that this percentage be greater than 20% of the revenues you regularly have, but currently, many companies are operating with very few profits or without them, and there are even companies that are working in the red, which means they have to invest more than they earn.
While studying all the factors that made companies have more or fewer profits, I realized that there was no single growth answer for everyone and that their actions depended on the point at which their company was at that moment.
That is why I decided to separate companies into three different levels, depending on the number of profits they obtain from their sales:
You spend more than you earn.
Companies, especially when they are starting out, normally have more expenses than income, but it is important to reverse this as quickly as possible to avoid the mistake of maintaining a company that is not capable of doing it on its own.
If you think your company is at this level, you need to pay more attention to your market. What the market is trying to tell you is that the service you are offering does not meet the established standard, so people prefer to acquire services from other companies.
Market value is established with consumers trying to get a lower price and producers trying to maintain a higher price; in this way an agreement is reached where neither the client is willing to pay more, nor is the owner willing to give it at a lower price.
The problem arises when the market considers that the service you offer is below what the average agreed upon, so you cannot compete against other companies in your industry and you begin to generate losses instead of profits.
You need to analyze your competition to see what they are offering and to define what the average of what is being offered in the area you are working in. The important thing is that you can keep in mind how others are working, so that you can understand what is the minimum that the market expects from your company.
Once you find the strategy you need so that your services are within the average of what the market expects, then you can move to the next level so you can continue with the growth of your company.
You spend just what you earn.
At this level you are just beginning to generate profits, you earn 1% to 20%, so you are practically only earning just what you need to keep your company afloat.
At this level it is not enough to just be part of the standard, if you want to continue growing you need to find your differentiator to stand out from the rest, you need that unique idea that will make your company different and therefore increase its value.
To do that you need to conduct an analysis not only of the market but also of what is happening within your company. What do you think is missing for you to stand out from the rest? Maybe it depends on modifying your approach a bit or offering something completely new.
There is no single answer for this, nor is there a magic formula that makes the difference, everything is personal for each company and will depend on the decisions that those responsible make.
When you have found your differentiator, you will be ready to move to level three.
You earn more than you spend.
This is the level that any company aspires to reach, at this point, your profits already form part of a considerable percentage of your income and your company begins to generate significant profits.
But, even if you are at this level, you cannot lower your guard and let things resolve themselves, you have to stay constantly updated. Remember that the market is in constant transformation and there is no way you can remain static while everything changes.
The best strategy you can have here is to keep moving as the market moves and as other companies seek ways to stand out. Plan the path you want to follow and find a way to achieve it and continue growing more and more.
Remember that it depends only on you to find the path that will lead your company to the success you are looking for. Do not let fear paralyze you, research, plan and act in favor of your company, find your differential and take it to the maximum to achieve greater profits. Keep your steps firm, but flexible to any change and enjoy your journey.