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The Technical & Operational Strategies for Increasing the Profits of an Indian SME Company

Apohan Corporate Consultants Pvt. Ltd. > The Technical & Operational Strategies for Increasing the Profits of an Indian SME Company

Role of a technocrat promoter:

Ideally, a business should be managed by one technocrat promoter and one financial promoter. When we look at the various competencies available with professionals, financial competencies and Technical competencies typically form mutually exclusive sets of individuals. The people who have financial knowledge don’t have technical knowledge in depth, the people who have technical knowledge don’t have the financial knowledge in depth. It is better to have these two functions managed by two different individuals. This can be achieved by the mergers and acquisitions between a small and medium enterprise and a financial investor.

Increasing Volume of Sales/Supplies

The volume of sales can be increased in the following ways:
Increase in production capacity
Adding new production capacity
Acquire new production capacity
Use all existing and new production capacity
Produce what sells
Produce what sells with more margin
Market all the production
Reduce the span (in months/weeks) of cash conversion cycle

Increasing Prices of Goods/Services

Increase quality for a price
Increased features for a price
Identify unique selling points
Target the niche Market
Identify right buyers
Market properly
Reach the high affordability markets
Carry out product basket rationalization
Provide value added services
Attack the most attractive elements in the value chain
Get rid of something that doesn’t make money
Incorporate indexation clauses in the sales contracts
Clarify what is not scope of work
Compress the margins of wholesalers and retailers
Get marginally lesser money quickly then getting the entire money very late from the client

Reducing Cost of Production/ Delivery

Reduce volume of inputs using Technology and management skills
Reduce cost of all inputs using proper recruitment policy
Identify contribution of each project/ product
Work with less but sufficient inventory
Increase quality of inputs to avoid rejection
Increase quality of processes to avoid rejection
Increase efficiencies to avoid rejection and wastage
Identify the effectiveness of each of the marketing avenues
Drop the inefficient marketing expenses
Look to reduce life cycle costs instead of up front costs
Include the internal costs including differential in cost of manpower to achieve the same work
Avoid all kinds of delays
Take benefit of scale of operation

So what should be the operational philosophy of a company?
The operations form the bread and butter of a company. There is nothing more important than profitable operations of a company. Even during the process of merger and acquisition, the investor likes to see whether the operations are profitable and whether they have the strategic advantages and flexibility.

Increase in companies wealth = (product price + incentive per product- production cost per unit- marketing cost per unit- financial cost per unit- asset replacement cost per unit- regulatory cost or tax per unit) * maximum sales volume possible with the available capital* number of cash conversion cycles in a year.

Apohan’s Role:

Apohan does not provide any of these operational services as they are highly technical & sector specific. However, Apohan, fully understands the financial side of the strategy & implementation of these technical, operational & marketing decision and integrates them with corporate management, business strategy, financial strategy & mergers & acquisitions.

The suggestions are layman’s suggestions into core activities and the businessmen are the best people who know the hundreds of aspects of these decisions.

six ways to increase cash and valuation of companies