Turnover is vanity-Business Growth school 101!

Some years ago, back in business school 101, this was the first lesson I learnt…
I was 25, worked for Deloitte and I couldn’t believe my eyes. I had been sent to visit a family construction group whose turnover for the previous year was £10 million, but this year it was £2 million. After 10 minutes onsite I called my manager, worried that these people were going into administration and asking if I should come back to the office – were we going to get paid?!

This is when I learnt one of the most valuable business lessons: “turnover is vanity profit is sanity”. My manager calmly asked me to check the profit. Sure enough, although the turnover had gone down from £10-£2 million, last years profit on £10 million was £500,000 but this years profit on £2 million was £800,000!

After the initial panic and then letting my brain fry for five minutes, I got it. The family had realised that turnover was just vanity. All those construction projects were going wrong on site and there was nothing they could do to halt it. So they moved out of the building side of things and concentrated on the design and land dealing. They found the key in a different product with a higher margin and immediately started to make more money.

So what is the lesson here? It is dependent on the price elasticity of whatever you sell, but if price is elastic then there is always an opportunity. Sit up and change what you’re doing right now if you are not already making millions!

There are some areas that this isn’t always possible. If you own a sweet shop for example, there’s not much you can do about your margin – everybody sells Mars bars at the same price! In this case it is just about turnover, the more customers …the more profit. However the sweet shop example really only applies to about 10% of businesses. For the rest of us we can choose what we sell, be it service or product. So if we shift to a higher margin product or service, we can change our lives within weeks.

So that’s all I want to say today, to share with you the main secret of Business Growth. After a decade of helping businesses grow and winning major awards for doing so, I can tell you that this works every time. If you want to get my opinion on what your business can achieve, please get in touch. After all that’s what this blog is all about – free information to really grow your business.

So what are you waiting for? Get to it right now everyone!

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