Read the full blog below.7 Ways to Increase Profitability
It’s one of the most popular topics across the industry… and rightfully so. If your business isn’t making money, then ultimately it isn’t going to be sustainable long-term.
Over the past 30 years I have been working with businesses of all sizes at a director level and am proud to have a track record of consistent profitability growth.
By this point it isn’t surprising that there are a number of reoccurring issues and factors that businesses fail to identify when looking to increase profits.
To offer some insight into these areas, I have outlined the following 7 Ways to Increase Profitability that you can implement in your business:
1) Staff engagement
Engagement is an imperative, not an optional extra.
Your staff are the crucial tool for driving your business growth and ultimately, increasing your profits. Staff members who have a clear sense of how their work contributes towards business goals and values achieve more both as an individual and in a team.
In fact, studies have shown that inspired staff are 125 per cent more productive than satisfied staff (Source: Gallup/Bain & Company). Investing in engaging your staff rather than just incentivising them is a fundamental step in increasing profitability.
2) Use your CRM to its full potential – takes investment and management
This may seem an obvious one but I have worked with hundreds of recruitment businesses who have access to a CRM system yet still have data that isn’t stored within it.
Your database is invaluable when it comes to short and longterm profitability – how are you going to market to individuals whose contact information is stored on a consultant’s mobile or desktop?
Implement a strict data policy with regard to your CRM and penalise those who don’t stick to it!
3) Hire your staff for the jobs they do now and pay them accordingly
The amount of businesses that are losing out on profit are often falling into the trap of implementing a managerial hierarchy yet continuing to pay staff in the same way.
In particular, I find myself encountering the following two scenarios regularly:
Businesses that may have partially converted to an account management model (eg sole supplier) but are still rewarding people like 360 degree consultants
Businesses that are developing a middle management layer but rewarding “managers” solely on personal billings
Ensure that management KPIs are aligned to your business growth and then pay your staff accordingly… ‘manager’ doesn’t mean ‘higher paid consultant’!
4) Only invest in L&D where there is a clear ROI and a means to measure it
The amount of businesses that send staff on day-long courses or pay for digital training tools with no aim or tangible outcome is astonishing.
In fact, more than half (51%) of businesses that invest in L&D admit that they don’t evaluate the results (Source: CIPD).
With L&D costs only increasing across the sector, it is more important than ever to ensure that your investment in skill growth is made wisely with a clear ROI to measure.
5) Qualify your clients and jobs, then tie them in
A clear and succinct qualification process with your clients is one of the most effective ways of increasing profitability by securing longterm contracts.
As well as this, you can set yourself apart from the competition with an innovative pricing model that deviates from ‘percentage of salary’ models that most hiring managers are accustomed to.
For example, a lower fee for exclusive work can produce a much higher profit than contingent business you have to share with other agencies.
Display your knowledge and understanding of their business and requirements, then deliver on your brief and tie them in exclusively for the next year of hires.
6) Protect yourself from claims with proper processes (like PIPs)
The last thing you want to have to contend with while focusing on increasing profitability is unplanned claims.
Since the removal of claimant fees for tribunals, there was a 90 percent increase in claims in the final quarter of 2017 compared to same quarter in the previous year (Source: CIPD).
So whether they come from a disgruntled member of staff going to a tribunal or the ICO with breach of GDPR regulations, ensure you have the correct processes in place to prevent any unwanted fines, settlements or payouts.
7) Don’t send your people on wild goose chases with an excess of short-term incentives
“I doubt they’ll do it but if they do, they’ll have paid for their bonus themselves!”
The amount of directors that I’ve heard say something on the lines of the above is astonishing.
While there may be an attractive outcome to near-impossible tasks, setting your staff on a path with a short-term incentive that will ultimately deviate them from their day-to-day will not grow your business.
Ensure that your staff are engaged, their objectives are in-line with your strategy to increase profitability and above all, that their individual goals are achievable.
Alison Humphries is a recruitment “lifer” who has been working within the industry for more than 30 years, and advising as a consultant and NED for the past 10 years. Her clients have included businesses of all sizes (from start-ups to business sale) across multiple sectors.
If you would like to find out more about increasing profitability, contact Alison for a no-obligation consultation and explore your business opportunities in more detail.