How to increase the profitability of your business

1. How to calculate your Responsiveness Index

Double Your Profits in Half the Time (Flanagan and Thomas, Simon & Schuster, 1996, page 90) will guide you in measuring your Responsiveness Index (Refer to previous page).

Your RI made up of

• your Decision-Making Index (D),

• your Priority Index (P),

• your Flexibility Index (F),

• your Communication Index (C),

• your Technical Index (T),

• your Resources Index (R), and

• your weighting factors for each index.

Your Responsive Index (RI) is expressed as RI = (d x D) + (p x P) + (f x F) + (c x C) + (t x T) + (r x R) where D, P, F, C, T, R are the indices previously explained and d, p, f, c, t, r are the corresponding weighting factors for each index. The weighting factor provides users with the opportunity to give additional weight to an index deemed to be more important than others (the sum of all weighting factors is 1). The manager of a franchise fast-food outlet, for example, may consider the Technical Skill Index (which relates to the correct cooking of the food, consistent delivery standards, etc.) more important than a Flexibility Index and, therefore, worthy of a higher weighting factor. The calculation must include the six indices. Double Your Profits in Half the Time is available online through www.zebrapress.co.za

2. Attributing success.

When Jack Welch was CEO of GE, he was asked what he attributed GE’s profitability. He replied, ‘…the ability to allocate resources—people and dollars’.

3. The three keys to profitability.

If calculating and acting on your Responsiveness Index seems like too much of an effort, you can resort to age-old advice that has its origins with the gods of business who advised

• decreasing expenses,

• increase margins, and

• increasing sales.

And all three of these can be undertaken at the one time. …