Inflation affects all of us in our lives and businesses. However, how we measure the impact and what we do about it is critical to maintaining a healthy profit for a sustainable company. In this article, we address signs that profit is leaking in your company, what to do if you experience these indicators, and how to determine which indicators are relevant to your company.
Profit leakage indicators:
- Growing fast and sales not completing on time
- Revenue is increasing but profits are decreasing
- Cash flow issues
- Encountering challenges not seen or experienced before and expenses building up
- Cannot forecast cost of goods and gross margins falling
- Projects blow up budgets and timelines with frustrated management
- Members of leadership team are working long hours and making costly mistakes
- Work environment is becoming more reactive with unplanned outcomes
- Leadership team not aligned and delaying decisions
- Hiring ahead of need or capital investments being made too soon
If you are experiencing one or more of these indicators, it is time to focus your team at digging into the data that will get you to the root cause. That data will come from your financials, operations measures, CRM, sales analytics, and employee knowledge. It is critical to know where you are making money, which customers are profitable, which products are profitable, and which teams are hitting their goals on time. Form small SWAT teams assigned to look at specific areas with weekly progress meetings among all teams. Cross pollination of information across teams will isolate causes of these indicators. Weekly meetings indicate a sense of urgency.
Once you find the cause for one of the indicators above, focus your team on how to fix it and assign the fix process to someone for accountability. The CEO must make sure the management team knows the “fix it” project is a top priority in order for it to get done. The solution may be better planning or more accurate data. Realize that if it is a data issue, it may also be a process issue or a gap in your information systems.
If your team is not sure how to fix these indicators, it may be time to seek outside help with someone that has the skills to do the analysis, craft a solution, and help you implement the solution(s). Whether you can do the fix yourself or need outside help, make that determination quickly. The worst decision is to do nothing!
C Squared Solutions provides interim or fractional CFOs, COOs, and CEO advisors in nearly all industries. We analyze and advise on these issues frequently through sophisticated modeling and experienced management. Give us a call or visit our website for more information and details. We have been there and done that which means we listen with purpose!
