The Three Levers to Improving Your Profit
When asked how to improve the profitability of a business, the default response by your typical robot accountant is to “restructure your costs” i.e. slash your overhead expenses and fire staff.
They’ll offer a bunch of recommendations like replacing the espresso machine with instant coffee or cancelling the annual staff Christmas party. Sound familiar?
Now, the problem I have with this advice is that it’s wrong. Cutting petty expenses is not a sure way to improve profitability. In fact, it can have the reverse effect. The problem when typical accountants and CFOs undertake ‘cost-cutting’ exercises is they only consider numbers on a profit & loss. What they often don’t consider is the non-financial consequences of being a tight arse.
Now, there are 3 ways you can improve the profitability of your business. Let’s call them the 3 levers.