Did you ever know a business person that was not trying to increase the profitability of their business? There may be interim strategies to get to the ultimate goal of increased profit—like investing to rapidly increase revenue—but the ultimate goal is always greater profitability. Increased profitability is an admirable goal; it provides the share holders with a return on their investment. That return is the reason we all make investments. The million dollar question, literally, is how do you increase your profitability?

Doing more faster is usually not the answer although it is frequently attempted. I know of only one long-term approach to increased profit: A sound business plan grounded with quantified and executable actions. To be quantified, you need to layer into your plan reasonable assumptions. If one of your actions is to increase your sales team by two over the next year, you need to make assumptions about the expense, additional revenue, additional gross margin, trailing aftermarket revenue from the additional placements, and the cash flow impact. To qualify as executable, your team needs to have the skills, behaviors, and experience to have a reasonable chance of success. If you have had three different sales managers in the last two years and your rep turnover is 80 percent, adding two additional sales reps is not an executable action.

My goal with this article is to provide you with some focus areas. Business planning requires discipline and detail. Not all business owners posses these skills / behaviors. That is fine; hire somebody that does to support your business planning and execution efforts. You continue to do what you do well. But somehow, someway, write a business plan and think about some of the following areas.

Get your sales turnover under control. If your turnover is greater than 30 percent, you have room for improvement. Reducing sales turnover is like strapping on rocket boosters. Not only do you save the fifteen thousand dollars plus that each turnover costs you in real dollars, but the actions you take to reduce your sales turnover will increase the productivity of your entire sales team. What areas should you analyze to surface turnover reducing opportunities?

• Sales manager: Does he / she have the correct motivators, behaviors, and skills supported with strong processes?

• Selection process: Who are you hiring?

• On boarding process: What does the first 30 days of employment look like. Are you providing a springboard to success?

• Territory: Does the rep have a good blend of current customers and target accounts?
Sales process: Do you have processes that enable your sales team to win business?

• Compensation: Is your team fairly compensated and does your compensation plan drive the correct behaviors?

Increase your revenue. This is not as easy as it sounds or as easy as we would all like it to be. Reducing sales turnover will certainly increase your revenue. After you get your turnover under control, there are areas to which you can focus:

• Use CPC leasing: It increases switching costs

• Sell more color: Drive B2C placements

• If you have good market share in the office segment, move into adjacent markets: Major accounts, GEM, production

• If you have high market share, give consideration to additional geography

• If you have low turnover, add sales reps or another team

Do you want another great strategy to increase revenue? Sell print management. I mean really sell print management, not displace printers with a copier. I do not want to be too blunt but printers produce two and a half times the output of copiers at twice the revenue per print. Simple math would indicate that there is five times the aftermarket revenue in the printer fleet at the same 50 percent margin. Why do you want to go in and attempt to displace a portion of the printers to get half the revenue and leave the remaining printers exposed for a competitor to grab? Learn how to sell print management, develop a plan, and execute. If you do not move aggressively into print management soon, VARs and supply companies will have the printer contract and will be gunning for your copier placements.

Increase your equipment gross margin. Most of the revenue-generating ideas will positively impact margins. For instance, lease revenue is usually more profitable than cash sales and B2C is more profitable than B/W, so increasing your lease and B2C ratio will increase profit. Some other areas to help you drive margin:

• Account reviews: Identify pain and heal it for the prospect

• Management engagement: Make certain the management team is involved in strategy and tactics

• Scanning: A fairly easy to sell solution that will drive margin

• Variable data solutions: Another great solution that drives margin

Increase your aftermarket return. Are you realizing 50 percent contribution out of your service and supply revenue streams? The highly profitable aftermarket annuity is why we are willing to spend so much money to get that copier / printer placed in the first place. Make certain you get the return you deserve. Here are some areas to analyze:

• Revenue per placement by segment: Do you have acceptable aftermarket pricing or are you shortchanging yourself

• Revenue per copy / print: An even better look at the revenue picture

• Process to annually increase CPP charge on contracts

• Technician territory design: Number of clicks managed and customer time v travel time

• Level of technical specialization: The more specialized, the higher the efficiency rating

• Recall and reschedule ratios by technician

• Total call procedure: First call effectiveness

• Parts usage budget at the technician level

• Management processes to coach technicians and address development areas

• Technical training matched to territory

Reduce your general and administrative expenses. There are basically three areas where you want to focus: Occupancy costs, process, and automation. Flow chart your processes using software like Microsoft Visio and look for redundancy and handoffs as you work to streamline. If you are compiling reports manually, look to automate by using the data that is already in your ERP. If you need conversion software like Monarch or training for your staff in Microsoft Access or Excel, make the investment. The low upfront cost will be returned many times over with the increase efficiency.

Generate cash: Increase your asset turnover velocity. Make certain your sales orders are billed promptly and invoices are mailed. Increase the ratio of lease transactions to 80 percent plus of your overall equipment revenue. Manage your inventory turns. Set up reserves for receivables and inventory and use this visibility to help manage these assets.

I am sure you have other great ideas on how to increase your profits. The key is to start with last year’s results and adjust those for all known material changes. Maybe you added a large account in the tenth month of the year—or you lost a large account. Once you have the baseline, layer in the impact of the actions you will take throughout the year and use your periodic results to track the results of your plans. Nobody will get it correct 100 percent of the time so be willing to adjust as you get more visibility and experience with the actions.

Tom Callinan is the managing principal of Strategy Development, a management consulting firm specializing in sales strategy and process, advanced sales training, performance improvement strategies, and mergers and acquisitions ( www.strategydevelopment.org ). From 1998 – 2005, Callinan was an executive with IKON Office Solutions. Prior to IKON, Callinan was the founder and CEO of Copifax, Inc., an INC 500 Company. Callinan graduated with honors from The Wharton School, University of Pennsylvania and can be contacted at callinan@strategydevelopment.org  or 610.527.3317.