Strategic Planning Kit For Dummies®, 2nd Edition

Checking Your Profit Margins

Are you ready to make more money in your business? Who isn't? Even if you're running a nonprofit or government agency, you're always looking at improving your profit margins. Your margins tell you how much is left after you've paid your direct expenses. In the SUV analogy, your margins tell you how much gas is left in the tank when you arrive at your destination. So what's the secret to making more money? Stop doing things that lose money. Now, before you roll your eyes, don't overlook the simplicity of this statement.

Here's a classic example of losing money: A mid-sized, business-to-business software company realized that every dollar of revenue generated from its marketing campaigns cost the business about $1.20. Result: The marketing campaign is costing more than it's worth ($1.00 – $1.20). Attributing marketing dollars directly to the sales generated can be a rude awakening.

Ready for some ideas on how to improve your margins? As you read through the lists of ideas in the following sections, keep adding to your list of strengths and weaknesses.

Identifying cash creators

As most organizations seek long-term sustainable operating models, cash creators aren't focused on the bottom line; rather they're about moving cash more quickly into and through the organization. Think about how the Great Recession helped people get lean and put some of these practices in place to stay that way.

Here are some ways to identify quick cash creators that yield lasting ...