In any business, there are almost always hidden and potential profit sources resulting from profit leaks. Generally they are hiding in plain sight. Here are six common places to detect profit leaks in your business.

Profit Leak Detection #1: Purchasing
This is the easiest leak to detect: You could be paying too much for what you buy. In many cases, concentrating your purchases with a single vendor can pay big dividends. Negotiate increasing discounts for increasing volumes and earn them as you go. When special discounts are not available, it might be more advantageous to shop around for the best price on each item separately. Reliable suppliers can be true partners in your business and can deliver value. Effective purchasing can boost your bottom line.

Profit Leak Detection #2: Credit

One of the most important ways to maximize profit in your business is to explore ways to reduce the interest expense on outstanding funds from high-cost sources. Analyze all your credit sources noting rates and amounts. Rearrange or reschedule terms, where possible. The savings you reap from effective credit and cash management will flow directly to your bottom line and greatly reduce the fear of running out of cash.

Profit Leak Detections #3: Transaction Costs

Analyze the data on your top 20 customers over the past year. You can definitely discover potential hidden profit opportunities. Explore ways to significantly decrease your order processing and shipping costs. What are they buying, why and when are they buying? Could you increase the order size or bundle with other products? Match your data with your insights to gain a unique perspective on your business – a true competitive advantage. You can boost your profits when you begin to track underlying trends in your transaction data.

Profit Leak Detection #4: Training and Travel Costs

Many business owners get caught up in non-essential networking, seminars, away from home events that don't directly boost their skills or drive sales to the bottom line. Plan ahead thoughtfully while selectively strive to enrich and expand your skills. Your decision around these expenses should be driven by your needs to be on top of your game; not just simply reacting to a shinny offer. Acquire the skills you need immediately before you need them.

Profit Leak Detection #5: Facilitites Costs

Facilities’ costs could be a drain when an expansion of space occurs due to an optimistic growth projections or an unexpected decline in sales volume. This excess in costs cannot be passed on to the customer due to competition in the marketplace. What if your growth estimates are off by 10% or even 20% (sensitivity analysis)? Would the proposed expansion be unwarranted? Be inventive and defray the cost short or long term or both; explore lease flexibilities. Implement remedies ASAP; this is a big drain on your profits.

Profit Leak Detection #6: Telecommunication Costs

Around the world, business owners have been traditionally very optimistic. It is that optimism that moves them to the pitfall of expanding their telecommunications’ costs too high in proportion to their current sales. Their unbridled optimism can lead to many issues even having to ride out contracts which hider products. Negotiate. Buy what is only needed; you can always add on. Most vendors will gladly increase your order, almost none will decrease it.

Remember – Just Say No to the Status Quo TM

Creating your best profit solutions is my highest priority.

Donna Marie Thompson, PhD

Author's Bio: 

Donna Marie Thompson, PhD is a Small Business Profitability Expert and Founder of Expert Profit Solutions. She is a two-time best-selling author who has spent most of her career problem solving in international management consulting.

Donna Marie has helped businesses meet their profit targets under challenging circumstances. She was a Director at PricewaterhouseCooper's Consulting, and has worked at Booz Allen, as well as local consulting firms. This wide range of experience in businesses of all sizes uniquely qualifies Donna Marie to guide small businesses to discover their hidden profit potential.

Donna Marie earned a PhD from George Washington University, an MBA from Virginia Polytechnic Institute, a CPA in the state of Maryland, and is a Master Practitioner of the Energy Leadership Index.

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