MSD Chartered Accountants

Most business owners believe growth automatically leads to higher profits. Unfortunately, that's not always true. In fact, some businesses become less profitable as they grow.

𝗪𝗛𝗬 𝗚𝗥𝗢𝗪𝗧𝗛 𝗖𝗔𝗡 𝗕𝗘𝗖𝗢𝗠𝗘 𝗘𝗫𝗣𝗘𝗡𝗦𝗜𝗩𝗘
Every business reaches a point where growth requires additional resources. Think about it. If you're currently servicing 20 clients and want to service 40 clients, you'll probably need:
• More staff
• More systems
• More administration
• More support
• More management

The question isn't: "Can we increase revenue?"
The question is: "Can we increase revenue profitably?"
Because revenue without profit is simply more work.

𝗧𝗛𝗘 𝗪𝗔𝗥𝗡𝗜𝗡𝗚 𝗦𝗜𝗚𝗡𝗦 𝗢𝗙 𝗨𝗡𝗣𝗥𝗢𝗙𝗜𝗧𝗔𝗕𝗟𝗘 𝗚𝗥𝗢𝗪𝗧𝗛
🚩 Revenue is increasing but cashflow remains tight
🚩 The business is becoming more stressful
🚩 You don't know which clients are most profitable
🚩 You're selling more but keeping less

𝗧𝗛𝗘 𝟴𝟬/𝟮𝟬 𝗥𝗨𝗟𝗘 𝗢𝗙 𝗣𝗥𝗢𝗙𝗜𝗧𝗔𝗕𝗜𝗟𝗜𝗧𝗬
Here's something worth reviewing in your business.
Very often:
20% of customers generate 80% of profits.
And:
20% of customers create 80% of problems.

Think about that. The goal isn't necessarily more customers. The goal is more of the right customers. Take a look at your client base.

Ask yourself: Which clients:
✔ Pay quickly?
✔ Value our work?
✔ Generate strong margins?
✔ Refer new business?

Then ask: How can we attract more clients like them?

𝗧𝗛𝗘 𝟱 𝗤𝗨𝗘𝗦𝗧𝗜𝗢𝗡𝗦 𝗘𝗩𝗘𝗥𝗬 𝗕𝗨𝗦𝗜𝗡𝗘𝗦𝗦 𝗢𝗪𝗡𝗘𝗥 𝗦𝗛𝗢𝗨𝗟𝗗 𝗔𝗦𝗞 𝗕𝗘𝗙𝗢𝗥𝗘 𝗚𝗥𝗢𝗪𝗜𝗡𝗚
Before chasing additional sales, ask:
1️⃣ Is this client profitable?
2️⃣ Can our systems support growth?
3️⃣ Will this improve cashflow?
4️⃣ Are we pricing correctly?
5️⃣ Are we measuring the right metrics?

𝗔 𝗦𝗜𝗠𝗣𝗟𝗘 𝗘𝗫𝗘𝗥𝗖𝗜𝗦𝗘
This week, review your top 10 clients.
For each client ask:
✔ Revenue generated
✔ Estimated time invested
✔ Profitability