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News & Press: Arizona Business News Updates

What’s Your Half-Time Profitability Score? 3 Things You Need to Know

Wednesday, July 02, 2014   (0 Comments)
Posted by: Rhette Baughman
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By Donna Marie Thompson, PhD

 

"Even if you are on the right track, you will get run over if you just sit there."Will Rogers

We all know about half time. It’s time for your team to regroup. To look over what went well and what didn’t in the first half. Enough time has passed so you can take a look at the big picture and not be distracted by a single play. The ref has blown the whistle and it’s time to see where you stand. And more importantly, it’s a critical time to plan for the 2nd half of the game.

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I’ll be the first to tell you that running a business is definitely not a game, yet the parallels between sports and business are striking. As small business owners and entrepreneurs we all like to compete. And win. A lot.

And I also need to state that I have great disdain for New Year’s resolutions. But there’s something about half time. It’s a great opportunity to check in on your business, on your plans, and on your profitability.


In small business time flies as we wait for orders to come in, we wait for our suppliers to deliver, and we wait for our team to execute on their responsibilities. Many business owners are too busy focusing on top-line sales to think about the true business measure, bottom-line profits. That is a big mistake. The better way is to manage your business with profitability front and center. Sure, sales are great but they need to be profitable from beginning to end to deliver the value you expect. Profits to your bottom line.

Even if your business is happily humming along, the environment in which your business operates is changing all around you. At lightning speed. So what exactly is your profitability score? Here are three questions that will help you calculate your score.

1. What is you net profit margin vs plan in the first half? In many business niches, six months is a good chunk of data to work with. If yours varies highly with seasonality or other factors take a look at the first six months of last year to give you a better benchmark if needed. How are your profits tracking compared to your expectations? What trends are you seeing? What does not seem to make sense? What other data do you need to act of this information? Dive deeper as needed to see your business with more clarity. Give yourself a score of:

·40 points if your profits are right on track.

·35 points if you are almost on track.

·30 points if you are barely on track.

2. What are your gross revenues vs plan in the first half? Top-line revenues can heal a lot of ills in your business, especially in the first five years. Are your sales holding steady or are they increasing as expected? Obviously, it goes without saying that you don’t have a real business if you don’t have sales. Yet sales alone is not enough. If your sales are right on track with your projections, then congratulations on a job well done. If your sales are lagging slightly, this situation can probably be remedied with some extra attention in the coming months. Give yourself a score of:

·40 points if your revenues are right on track.

·35 points if you are almost on track.

·30 points if you are barely on track.

3. What is your Marketing Return on Investment (ROI) vs plan in the first half? Each of your marketing activities costs you time, or money, or both. How well are your marketing results tracking with key measures such as: repeat business, referrals, lead generation, new partners, or whatever the major focus of your marketing activities was in the first half of the year? Results are all that matter so keep a close eye on your marketing ROI. That can save you a bundle and boost your profits at the same time. Give yourself a score of:

·20 points if your marketing ROI is right on track.

·10 points if you are almost on track.

·5 points if you are barely on track.

Your Profitability Score

Add up your points from the three questions to calculate your half-time profitability score. The top score is 100. Look into these three areas of net profit margin, top-line revenues, and marketing ROI to kick off your game plan for the second half. Half time gives you a great opportunity to look at what’s working in your business. Take full advantage of this formal split in the year to take your business to new levels of profitability. The best time to start is now; the sooner you start, the more profits you will enjoy. And you'll be in great shape in the second half.

Were you surprised with your profitability score?

Photo credit: RobHelfman via photopincc


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