Often when speaking to clients about developing thier business they focus on increasing turnover. This is seen as "king" if the business is to grow and profits to rise.

From  years of personal experience both in business and during training as a business development specialist, I know that  the above is not the case. I suspect that many business owners also realise this is not true but often not realising why!

As this is a classic problem faced by many I thought I would share a particular story told to me recently.

John has run a successful company in the construction industry. He wanted to increase business and saw one particular route was to quote for bigger jobs which would include areas were the business didnīt have the expertise but could sub-contract. 

Turnover increased from one million pounds to three million pounds within three years. Unfortunately, profits didnīt follow suite, they fell!

When the contracts were analysed it became apparent that those that included the sub contracted work were losing money. The reasons are outside the scope of this article but what had promised to be an exciting expansion proved to be in effect the reverse.

How do you avoid problems like this arising?  My belief is that there are a number of areas that need to be looked at:

1. Donīt go headlong into taking new business unless you know itīs going to prove profitable.
   
2. Donīt be afraid of getting rid of customers who are not proving profitable or take far to much of your time.
   
3. Make sure your accounting system can produce meaningful management information which you can rely on, your accountant can assist here.
   
4. If you havenīt got an FD (and many small businesses havenīt) then you could consider doing as many of our clients do, to have your accountant come and visit you on a quarterely basis to review the business with you.