Profit Protection and Improvement
“Turnover is vanity, profits are sanity and cash reality” is as valid a saying as it ever was. In the longer term practices do not survive because their strategy is no longer appropriate to the market conditions but in the short term they fail through lack of cash. Getting your strategy right for the long term is key, as is deciding whether the lowest cost provider model (volume based process driven) or the more normal collegiate service led approach should be used.
Management of the practice (and more importantly a group of partners) is key and this we believe should be via a zero based budgeting approach looking at the productive capacity of the firm in comparison with the available work. It is then that it is vital to identify and actively use a series of KPIs, to set key benchmarks and to manage fee income and collect the cash while engendering a culture that focuses on profit. If you need to make cuts do so only once and do so quickly and perhaps most controversially consider linking drawings to cash collected.
You are welcome to view our podcast on this subject.