Answer 

1. Do you have significant competition?

Business would be so easy if it weren’t for competition. If your competition is significant you can bet that they are working hard to improve their margins to attack your market share sooner or later. You should e working harder than they are…right now.

2. Are operating and/or production costs increasing?

High costs are a high-profile target for existing and new competition.   Low costs of production are a fundamental strength.  It takes more than desire to put together an integrated systematic approach to cost control.  A world-class approach builds improvement into the culture.

3. Is there downward price pressure?

In real dollars the cost of many goods and services has dropped significantly over the recent past.  Monopolistic pricing is rarely possible or even realistic. A review of the price-volume-profit equation often shows that either you or your competitors can maximize profits at a lower price.  Then there’s price deflation on top of the other market dynamics demanding that you become more cost effective. Your profit initiatives should work to support your profits even at lower prices.

4. Are products/markets mature or maturing?

Product maturity can come rapidly these days with fast-track product design and jaded markets. Someone out there is looking for a disruptive technology that will obsolete your entire product line. A fundamental concept of the Profit Improvement Process is that it stresses profitable revenue growth as well as cost and loss reduction. You cannot cut your way to growth.  And you cannot stand still without some type of profit improvement initiative.

5. Are investors/owners dissatisfied with your profits?

Even though the halcyon days of the last decade created some unreasonable expectations, the fundamental reason for your corporate existence is to provide a return on investment to your investors and owners. Proactive management teams are constantly working to improve profits.

6. Is your market share small or diminishing?

Maintaining a defensible position in the market (be it narrow or wide) is vital to the long-term health of your company. A balanced profit improvement initiative includes revenue as part of the focus.

7. Do you need or want a bigger market share?

Short of inventing a disruptive technology that upsets the entire cost structure of the market, continuous margin improvement can build the foundation for bigger market share. Wouldn’t it be nice to have the choice of how you will approach competition? Build that choice in with a strong cost/price position.

8. Is your sales force meeting resistance?

Every customer (corporate and individual) is under pressure these days…just as you are. Customers demand more and reward those who can deliver. The entire structure of your company should be intrinsically focused on supporting your sales force with the costs and margins they not only need today but also will need tomorrow.

9. Are new competitors entering the market?

You may not even see the competition yet. There is always someone out there with new technology or business methods that can assault your markets. Stand still and you will be overrun. World-class companies keep working on loss reduction, cost reduction, and revenue enhancement to stave off the competition.

10. Have you had a cutback or lay-off in the last 3 years?

Lay-offs are a significant symptom that you are behind in the competitive dynamics of the marketplace. Cost-effective organizations rarely have lay-offs because they can maintain their market positions even when the economy turns south. You should be practicing the principles of cost effective organization thinking built into any good profit improvement initiative.