Top tips to improve revenues and profit margins
22 March 2011
Almost without exception CEOs and GMs are always looking at ways to improve revenues and thereby profit. Maybe they are in the position of feeling they have tried most things with varying degrees of success.
Yes, there are the rate increases, revenue management, minimum stay bookings, seasonality, and a plethora of what I would describe as the traditional givens.
The views that follow offer some other ideas.
“Business has only one aim and that is to create a customer,” said Peter Drucker, who if not the best management thinker and strategist was certainly in the top three.
Drucker, in my opinion, had this wonderful ability to simplify complexity and get straight to the heart of an issue. I would add just one word to Drucker’s view: “Business has only one aim and that is to create a profitable customer.”
At the risk of stating the obvious, without an acceptable level of positive profit, growth remains but a distant dream and a business is likely to be in a constant survival game.
Saying that we must grow revenue/profit is commonly stated but not so easily achieved.
During times of good or improving economic growth, as we have in Asia now, businesses aim to raise prices and minimise costs to deliver an improved bottom line.
The key question in my opinion is: Is that growth coming from a well-crafted, well-communicated, well-implemented, well-executed and accountable strategic plan, or is it coming simply because of a ‘rising tide raises all ships’?
When a downturn appears all bets are off - prices are slashed, discounts go up, service levels get strained etc so if businesses are relying on hope, then this is not a strategy.
Another much used word is alignment, which simply means ensuring that every action a business takes at every level is contributing to the goals within the Strategic Plan and the Business Plan.
So how do you achieve this? The alignment challenge typically occurs when the strategic and business planning takes place at management level and isn’t effectively passed down the ranks to the people who will be required to make it happen.
Drucker’s premise for growth posed five simple questions:
· Where have we come from?
· Where are we now?
· Where do we want to go?
· How do we get there?
· By when do we want to get there?
