5 Actions Midsize Companies Can Take to Increase Profits

Midsize businesses are often overlooked. These are the companies that Gartner defines at having revenue between $10 million to $1 billion and 50-250 employees.

In working with such companies, as well as the big ones, I’ve seen five key problems that medium-size businesses tend to have that they could solve by using techniques from the larger ones.

Problem #1 – No Actionable Profitability Information

  • Action: Set up a profitability reporting system that has detail by customer, geographical location, and product line item.  Identify unprofitable customers and products and create a plan to rectify the situation.
  • Example: One of my clients doubled profits after they realized one customer segment, which represented over 25% of sales, was essentially breaking even. They raised prices without hurting sales volume.

Problem #2 – Dysfunctional Incentive Plans

  • Action: If your sales and marketing bonus plans are structured around volume targets, change to a profit-based reward system.
  • Example: When I worked at Seagram, we eliminated the incentive for end-of-year distributor loading and changed the plan to focus on sell-through at the retail level. Later, the plan was weighted based on unit profitability.

Problem #3: Ignoring Pricing

  • Action: Put someone in charge of measuring prices. Work on developing value-based marketing strategies.
  • Example:  An individual I placed at a packaging company was able to increase prices by over one percent per year, using a value-based sales pitch. The company’s stock tripled as a result.

Problem #4: Lack of Financial Accountability

  • Action: Identify key financial metrics and use them to determine problem areas. Then develop and execute a plan to fix the problems.
  • Example: By tracking details of inventory turnover, one of our clients with sales of $30 million reduced inventories by over $1 million, while increasing the on-time order fill rate from 85% to 90%.

Problem #5: Misunderstanding Total Costs

  • Action: Analyze the total cost of goods, including raw materials, manufacturing, and shipping. Compare to your competitors.
  • Example: A person I recruited came up with a new plant location methodology that allowed his company’s the volume to more than double while increasing profits.



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