How to increase profitability

Checklist

1. 1 Ensure managers (and other employees) are focused on profitability - but without losing sight of the need to manage cashflow.
2. 2 Identify the key drivers of profitability; set and monitor key performance indicators (eg sales per employee, gross margin).
3. 3 Avoid distractions for example, one-off projects which don't play to your strengths or contribute to your strategic goals.
4. 4 Create plans with measurable objectives and set budgets; learn from experience to make continuous improvements.
5. 5 Continually gather market information; build a dialogue with key customers and suppliers.
6. 6 Anticipate the knock-on effects of any changes you plan.
7. 7 Focus on a niche market you understand.
8. 8 Invest in advertising and other promotional techniques (such as social networking) to increase sales volume; actively sell and deliver a service that builds customer loyalty.
9. 9 Maximise the value of sales: consider moving upmarket and charging the highest price you can justify for the product; innovate to stay competitive.
10. 10 Focus on your most profitable customers and products.
11. 11 Specify the right quality of supplies and negotiate favourable prices; monitor competing supply offers.
12. 12 Monitor and control overhead costs and eliminate unnecessary activities.
13. 13 Maximise the cost-effectiveness of assets: base purchasing on lifetime costs; sell unnecessary assets (or sub-let surplus capacity).
14. 14 Recruit the right employees; provide a working environment, training and motivation which maximise their effectiveness.
15. 15 Create systems to reduce errors and wasted time; create policies to reduce the need for managers to repeatedly make the same decisions.
16. 16 Invest in information technology and other labour-saving equipment.
17. 17 Share best practice across the company.

Cardinal rules