Any small business owner can relate to the “highs” and “lows” of sales and profit margins, this is especially true for the shop owners who work with third party appraisers. There’s always a possibility of losing large sums of money. As the owner, it’s likely that you’re wearing most of the hats in the shop and rarely have time to assess your marketing, hiring or employee production and efficiency. These components are essential to your business because they affect your bottom line tremendously. At Management Success, we see this problem more often than none and always seek to improve our clients’ management practices. Here are some solutions to how you can find out what’s really affecting your bottom line.
Evaluate your employees
Remember, your employees’ productivity contributes to the business’ efficiency and overall success. A Robert Half Management Resources survey suggests that only 47% of workers are fully aware of the connection between their daily duties and the business’ finances. Check in with your employees and ask yourself, “Are they producing at max volume?” If your numbers aren’t matching then it’s time to set new policies, re-train your employees and make sure they’re aware of the rate they should producing. Not only will this form of communication help your business, but it will also help motivate your team.
Calculate the numbers
When you calculate and assess your numbers you’ll have a better understanding of what’s really going on. Start by checking your average expenses so that you can set a sales target. This step by step formula can help you determine what your shop should make every week to be profitable.
1.) Add expenses, this includes expenses for the past four months, once-a-year expenses & owners replacement cost (cost to hire another person to do the job)
2.) Divide by 4 (to get a monthly figure)
3.) Divide by 4.3 (to get a weekly figure)
4.) Add YOUR PROFIT to this number
5.) There’s your weekly sales target
Once you know your weekly sales target, you can analyze the effectiveness of your sales.
Take a look at your marketing
If you’re not meeting your sales target, you may want to look at your marketing plan. If you don’t have a plan set, it’s time to put one in motion. Your brand is the message and the key is to find out which message works best. If its within your budget, try branding the company vehicle that’s used for picking up parts. This form of marketing is a fantastic way to attract new customers who may not be aware of your shop. Another alternative is direct mail. This serves as a great tool to keep in touch with current customers and remind them of the services you offer. Just remember to measure effectiveness so that you’ll know which actions work best.
Implementing these actions will improve your business. To find out where the black hole is in your shop’s finances, take this quiz.