The six rules to making healthy profits

The academics have identified six factors that have a “strong link” to above average trading performance in businesses employing between 20 and 250 staff.

They found that businesses grew sales by an additional 4.5percent if they used three of the six strategies compared with businesses that didn’t.

And of the 57 percent of small and medium businesses that were not, three-quarters were only one step away from doing so.

The academics surveyed 500 businesses and combined existing research with a new statistical analysis to come up with what they have called “a blueprint for success”.

Stephen Roper, professor for enterprise at Warwick, said the research highlighted what small businesses were already doing to achieve “real growth”.

“As the economy moves out of the recession and into a period of growth, new opportunities will emerge for many firms,” he said.

“Adopting the blueprint will help these firms maximise their growth and profit potential.”
Tim Rivett, head of small business at Royal Mail, which commissioned the study, added that it could provide businesses with a simple guide against which to benchmark their own performance. “The characteristics are practical and easily applicable for the majority of businesses,” he said.

The factor that had the most significant impact on performance across the businesses was having a flexible management style and team-based working rather than adopting standardised or routine work practices.

Marketing was also important, with businesses adopting different strategies but those using broadcast media seeing “very significant benefits”.

Outside the core six factors, the academics highlighted that those businesses that export their goods or services also outperformed those businesses which stayed within their own country by up to 35percent.

Business services and hotel and catering companies were most likely to be following the blueprint already, the study found. However, other services businesses and construction companies were least likely.

The blueprint for success

Striving for growth
Actively seeking to increase sales

Managing flexibly
More responsive and flexible management

People planning
Plotting out skill needs and focusing on staff development

Using broadcast media to reach new customers

Research and development
Not just technology but also being open to new ways of doing business

Process changes
Reducing costs or improving service quality