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Systemizing Your Business: Did I Make It? Or just Take It?

March 4, 2008 | Bottom Line, Profitability, Systemizing | Sandye

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Thoughts from Sandye Linnetz, Systems Goddess, Process Prodigy

"How'd you do today?"
"Great, I made $1000."
"Wow! How'd you do that?"
"I sold 4 of those new products!"
"I thought they sold for $250 each..."
"They do."
"Then how did you make $1000?"
"I sold four of ‘em. Duh."
"Didn't they cost you anything?"
"What do you mean????"
"Don't you mean that you "took in $1000 - not that you MADE $1000?"
"Whatever..."

It's so easy to caught in the trap of "I sold it, so I made it". I call it a trap because the bait is so tempting... the bait, of course, is the dollars you take in... the trap is not considering the dollars and effort put OUT to take those dollars in...

What system do you have in place to determine PROFITABILITY? How do you keep track of your bottom line - the PROFITABILITY of a sale? How do you know determine what percentage of the money you take in actually stays in your company, i.e. in your bank account? After all, isn't that where you want it? Aren't you in business to make money? Are you just turning goods and services or are you making a healthy profit?

The steps for developing a process for tracking profitability are simple. Following the steps, once you develop them is vital.

First determine what you are selling and what it actually costs you to do so. With a product that you buy and resell, that's easy to figure out - check the vendor invoice (including shipping and handling, of course). With a product that you produce, it's a bit more involved. Production costs can vary depending on quantity, and you should be considering storage and packaging, too. And take the time to figure in the sometimes "hidden costs"; phone calls, advertising, marketing...

If you are selling a service, the procedure is the similar... just possibly more "costs" to consider. There are always obvious costs; out of pocket expenses, materials and delivery, but what about a percentage of overhead and your time? Your time - and your expertise - may be your most valuable assets. How do you value them? How do you account for them?

WHAT are you doing now? What are you currently doing to keep track of cost of goods and services? What is your system for always knowing where you stand on profitability? Is that information readily available and easy to understand? Do you track and control - money in and money out for each sale? Is there a running total of money in and money out? Are you aware of what percentage of your sales is solid profit? WHAT process, if any is already in place? Don't just think about it... write it out and look at it.

Now ask yourself: WHERE do I want to go with this system? What information is necessary for me to be both aware of and in control of my finances? Look for the holes in your current system. What information is not clear within your current system? What have you been missing?

Finally, move to action; the HOW. This is the step where you determine what information and record keeping is necessary. Design your system so that anyone, at any time, can see what and how you are doing and, with certainty, determine actual profitability.

A million dollar company has no stability if it costs two million dollars to operate it. Do you actually KNOW how much money you are actually making, or are you just counting the dollars coming in? Knowing what's going on in your business - having a profitability system in place - will allow you to grow your business and track it's growth.

Need more help? Do you have My Business Machine Basics? Maybe it's time for your free Success Session with Beth Schneider, or consulting with one of the Process Prodigy experts. We're here for YOU and your company. Make More and Keep More of It!

© 2008 Beth Schneider, Process Prodigy, Inc. Want to reprint this article? Feel free as long as you include the following:

Beth Schneider, President of Process Prodigy Inc., www.processprodigy.com, along with her team of highly sought after operations consultants, reveals the insider secrets billion-dollar corporations pay thousands of dollars for. Specializing in process creation, the Process Prodigy tools and techniques have helped entrepreneurs increase productivity by as much as 600%, and revenues by as much as 250%. Visit www.processprodigy.com and sign up to receive the Process Prodigy Ezine, "Your Tips" and the FREE Report "How to Save Yourself Time Energy and Money".


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