You have a plan that’s specific to your business. Now what? How do you execute on this big picture plan? Start by using your budget and forecast to run your business by the numbers. Running your business by the numbers also means tracking Key Performance Indicators (KPI’s) and establishing a regular cadence for meetings to be able to execute your plan and measure your results.
We’re going to talk about increasing gross margin. One of the best ways that you as a business owner can go about figuring out how to improve profitability without increasing sales. One of the best ways to improve gross margin is by increasing throughput or increasing utilization.
It’s easiest to talk about in terms of the manufacturing sector. Products get created in a manufacturing building. They go in on one side, and come out as finished goods. If products are being manufactured at a 100% efficiency rating, that means that we’re going as fast as we possibly can. But nearly no one is going as fast as they possibly can. If a realistic efficiency rating is more like 80%, what would happen if we increased it by just 10%? What if we could go from 80% to 90% efficiency?