How Should You Go About Improving Your Profit?

Where Should You Start?   SEPTEMBER 2015

You cannot work upon everything at once so a detailed analysis of your business is required to give you the most important areas to focus upon to get the quickest results.

From a financial perspective an analysis of your KPI’s (Key Performance Indicators) will guide you to where improvements can be made and results improved quickly.

At TA ACCOUNTING LIMITED we prepare our own set of KPI’s taken from our database.

Each year we analyse our CLIENT DATABASE for travel businesses.

Below is a summary taken from the MARCH 2014 TAX YEAR from Retail / Corporate Travel Business’s with a full 12 months trading.

The raw results of the travel businesses are analysed as follows:

Their results are broken down into Sales, Gross Margins, Other Income, Staff Costs, Other Costs and Net Profit.

Then the shareholders salaries are removed and an arm’s length salary added back for each owner / shareholder who works in the business. The size of the shareholders salary depends upon the volume of sales of the business.

The amended results are then sorted into order based upon their Net Profit % of Income.

We use the % of profit so that a small travel business can be compared with a large travel business.

From this we analyse in detail the results of the travel business’s who are our TOP 10.

Below is a summary of the results from the TOP 10 in March 2014.

What is important here is not the
Gross figures but the %’s.

The KPI’s can be subject to a more detailed analysis against an individual clients travel business results.

The other figures that we find useful is to do with staff productivity, FTE is Full Time Equivalent Staff members:

THIS GIVES US A FOCUS FOR IMPROVING PROFITS YOU MAY BE AWARE THAT
PROFIT IMPROVEMENT CAN ONLY BE ACHIEVED BY 4 MEANS

  • INCREASE SALES
  • INCREASE MARGINS
  • REDUCING COSTS
  • IMPROVE PRODUCTIVITY

But where do you start? The KPI analysis highlights the start point and also the likely magnitude of the results if we improve.

  • Lets target Revenue to Sales – greater than 11%
  • Staff Costs to Commissions – less than 53%
  • Other Costs to Commissions – less than 25%

The Result will be that greater than 20% of income will be left as Profit.

Generally improving your margin is the place to start to get the best results quickly.
Here are some ideas to work on:

  • Add $10 to every booking.
  • Package products and services.
  • Switch clients to higher yielding products.
  • Charge Booking and Credit Card fees.
  • Sell additional products and services (Do you want fries with that?).
  • Develop unique products and services that are not easily compared on price

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TAANZ - Travel Agents Association New Zealand link to website

T. 09 524 6178      F. 09 524 6179     E. contactus@taaccounting.co.nz

You cannot work upon everything at once so a detailed analysis of your business is required to give you the most important areas to focus upon to get the quickest results.

From a financial perspective an analysis of your KPI’s (Key Performance Indicators) will guide you to where improvements can be made and results improved quickly.

At TA ACCOUNTING LIMITED we prepare our own set of KPI’s taken from our database.

Each year we analyse our CLIENT DATABASE for travel businesses.

Below is a summary taken from the MARCH 2014 TAX YEAR from Retail / Corporate Travel Business’s with a full 12 months trading.

The raw results of the travel businesses are analysed as follows:

Their results are broken down into Sales, Gross Margins, Other Income, Staff Costs, Other Costs and Net Profit.

Then the shareholders salaries are removed and an arm’s length salary added back for each owner / shareholder who works in the business. The size of the shareholders salary depends upon the volume of sales of the business.

The amended results are then sorted into order based upon their Net Profit % of Income.

We use the % of profit so that a small travel business can be compared with a large travel business.

From this we analyse in detail the results of the travel business’s who are our TOP 10.

Below is a summary of the results from the TOP 10 in March 2014.

What is important here is not the Gross figures but the %’s.

The KPI’s can be subject to a more detailed analysis against an individual clients travel business results.

The other figures that we find useful is to do with staff productivity, FTE is Full Time Equivalent Staff members:

THIS GIVES US A FOCUS FOR IMPROVING PROFITS

YOU MAY BE AWARE THAT PROFIT IMPROVEMENT CAN ONLY BE ACHIEVED BY 4 MEANS

But where do you start? The KPI analysis highlights the start point and also the likely magnitude of the results if we improve.

Lets target Revenue to Sales – greater than 11%

Staff Costs to Commissions – less than 53%

Other Costs to Commissions – less than 25%

The Result will be that greater than 20% of income will be left as Profit.

Generally improving your margin is the place to start to get the best results quickly.
Here are some ideas to work on: