Here at Advantage we’ve worked with hundreds of businesses, and we’ve found a lot of misunderstandings about profitability and as a result a lot of business owners not earning what they are worth!
Myth #1: We just need more customers!
But, do you really? What you really need is more “contribution margin” (or Gross Profit). If you are losing money now – then more customers may just mean you can lose more money faster! You may need more staff, more stock, more machines, bigger premises. Are you selling effectively to your existing customers? Have you reviewed your sales organisation & process? (even if it is just you doing the selling!) Do you know your existing customers’ potential? We’ve introduced many businesses to our proven sales management system – simple and effective systems, consistently followed must produce results!

Myth #2: We just need to be working harder!
It’s an old cliché – but you actually need to be working smarter – how do you do that? When you’re working in the business sometimes it’s hard to step back and see the big picture. Doing more of what you’ve always done will just produce more of what you’ve always had – and if that’s inadequate profits you certainly don’t want that continuing!
Talking to a trusted, experienced, confidential advisor will always give you new ideas. And remember – accountants tend to look backwards – cost reduction focussed, and that’s not all that you need.
Myth #3: We just need to reduce staff costs!
Pay peanuts – get monkeys. Never starve the staff in an effort to improve profitability – unless you are seriously overpaying them in the first place – and unless you’re with TVNZ you probably aren’t! Motivated, keen staff produce better, more profitable work – if the business model supports their efforts. If you can’t measure your staff’s productivity – then that’s not their problem – it’s yours!

Myth #4: We shouldn’t be losing money – we are adding a good markup!
We find many people are still unclear about the difference between “mark-up” and “margin”, and are even more unclear about the sort of gross profit margin they should be aiming for. Advantage compares your business results with the National Benchmark results, so you can see what needs to be worked on to achieve the results you want.
Myth #5: We can’t increase prices – we’d lose customers!
Well, you might – but you might not! A 5% price increase may not be noticed by 90% of your customers, and on average NZ SME profitability could produce up to 17% more Net Profit for you! So you could afford to lose one or two customers, anyway.

Myth #6: We can’t cut costs enough to make a real difference!
Yes you can – do you realise that if you increase prices by only 5%, shave 5% off your direct costs, and a further 5% off your overheads, it can make up to 67% difference to your bottom line? That’s a real difference – and it is achievable in most businesses.

Myth #7: Profit’s a financial matter – nothing to do with marketing!
Telling your story effectively means people will value what you do more highly than your competitors – look at the way companies like Starbucks have developed their marketing – not cheaper, not better, but FAR more informative about coffee! Shift the focus from price!

Myth #8: People only go on price nowadays – driving our profit down!
They will IF you let them – the “stack ‘em high, sell ‘em cheap” mentality certainly does exist – but who said you have to accept it? Sell on service, turn-round times, quality, convenience, logistics support, expertise, after sales service – whatever it takes. Remember – if people can’t see any other difference then they WILL choose on price.

Myth #9: We are stuck in a low price rut – we can’t break out!
Many business owners accept current market conditions as “set in concrete”. But you do have some choices – are there premium products you can offer? A VIP service? Can you move part of your business into a premium price bracket? Develop proprietary products? Sell on-line direct to end users?

Myth #10: I’m on my own – no one can know my business as well as me!
Quite right – in one sense – you are the expert on your particular business. You do know it best – and that is both a benefit and a hazard. Because the business may come to rely totally on you – then you haven’t got a business – you’ve got a very stressful job! Talking to a business advisor or mentor will give you the opportunity to stand back from the business, in completely confidential conditions, and help give the you the tools to move forward the way YOU want to. Even the best athletes use coaches!