If you’re looking for a boost to the bottom line, there are two, and only two, ways to get it. You either need more money coming in or less money going out, period. If financial growth is your objective, then your entire organization had better be focused around one of these two attack plans.
More Money In - Top Line Growth
How do you get more money coming in the door? You sell more of course. There are only 3 ways to get more sales coming in:
- Increase the number of customers
- Increase the average value of each sale
- Increase the frequency of sales
How do you keep more money in the business? You spend less, otherwise known as cost control. There are 2 basic types of costs that need to be controlled.
- Variable Costs – these are the costs directly related to whatever product or service you provide. If you sell more, these costs go up, if you sell less these costs go down. The main variable costs are typically labor and raw materials.
- Fixed Costs – this is overhead. It doesn’t matter how little or how much you sell, you still have to pay these bills. Examples of fixed costs are rent, and management and administrative salaries.
Who Should Work on What?
Each department has an important role to play in growing your business. Take a moment to look at the business cycle and see if you can determine which departments typically focus on which aspects. We’ll take a look at this next, you might be surprised by some of the answers.
Summary
There are only 2 ways to financially grow a business. If you want your bottom line to grow your business focus must address these two things. Each department has a critical role to play in the overall strategy.
