How a robust business review can support sales growth and profitability
It seems obvious enough. If you fully understanding what’s happening in your business, then you are well placed to exploit your company’s strengths and tackle any key issues appropriately. Yet despite this pretty simplistic notion, many business owners do not have clarity on the financial health and operating complexities within their companies. When sales and profitability levels fall, it can be all too easy to focus on the wrong things, particularly if you are a very hands-on owner.
All too often we see business owners taking a cut to their salary and operating their business more from a survival standpoint rather than taking a step back to see where the gaps and issues are. This was the case for a small manufacturing business whose Earnings Before Interest and Tax had dropped to -12%, with a turnover of $1m per annum.
Gibsons helped this manufacturing company to access government funding which enabled a rigorous review of the business.
Through Gibsons’ strategic review the key strengthens of the business were clear to see – a small and highly skilled team headed up by an owner with a high level of technical understanding, and a satisfied and very loyal customer base who were not sensitive to changes in price. No financial performance reviews, coupled with little or no understanding of costs in estimating, were central to the profitability issues the company was experiencing. Gibsons set into place some key actions to overturn this downward profitability trend and address the issues identified. This moved the company from -12% to 15% EBIT and increased their turnover by $0.8m p.a.
Without clarity on your business’ operations and financial health, it is hard for any business owner to take the appropriate actions needed to overturn a drop in profitability. An independent third-party advisor can bring an objective insight to identify and support the changes needed to enable sales and profitability goals to be met.
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