05/08/2014

By Ian Baxter, Owner and Chairman, Baxter Freight


Profit is the lifeblood of any business, trading profitably is its raison d’etre, what it’s there to do. It’s certainly not a dirty word! Yet while all businesses would probably lay claim to profit focus in many cases the claim doesn’t quite match the reality on the ground.

Before I offer my advice, I want to enter a caveat. When I talk about profit focus I’m talking about focus on “sustainable profits” by which I mean those derived from an approach to doing business that’s likely to be enduring even when subject to scrutiny and the rigours of a competitive market. It’s not my intent to encourage people to take advantage of others or “rip people off”.

My caveat out of the way, I believe doing these eight things will make a real difference to your profitability. They’re not that complicated and can be done immediately.

1. Focus your team on making profit today. When I joined RH Freight I asked a manager how the month was going. He said he didn’t know because he always looked at profitability at month end. We changed that approach completely so that all revenue generating staff knew exactly what their targets were and how they were doing on an hour by hour basis. Immediacy changes everything. Do it now!

2. Get staff to take ownership of your profit targets by aligning their interests with yours. Offer the opportunity to earn bonuses (yes, bonuses) if targets are hit. Bonuses should be earned from sustainable profits, from measurable performance and should only represent a reasonable proportion of salary not the lion’s share. Managed properly they’re a brilliant tool for rewarding staff based on performance.

3. Encourage your team to make suggestions to improve efficiency. So often managers rely on their own ideas of how to get the job done. This often leaves the people who actually do the job wondering why they have to do it that way. So why not ask your staff what improvements they would make if they owned the company. Show respect for their ideas even if some are impractical. That way, they’ll feel encouraged to make suggestions in the future. Their opinions and their buy in are very valuable.

4. Make sure you charge for the value you’ve added. Ultimately pricing is not about being the cheapest or the most expensive it’s about making an assessment of the value you’ve added and charging for it. If you’re not adding value you’ve no business doing the business, where you are the customer should be happy to recognise that. You should continually assess this question to make sure you’re always competitive and properly paid for the work you do.

5. Never assume that the cheapest supplier is best. This is really the flip side of 4 when you’re the buyer. Be happy to pay for the value added given market alternatives, no more and no less. Form good long-term relationships with suppliers and help them cut costs so they can pass savings to you. Offer reciprocal business and other non-financial concessions to secure a better deal. Be happy to give a customer testimonial praising their service. This costs nothing and creates goodwill. Consider asking for an end of year rebate based on the volume of work you’ve given.

6. Plan ahead. Take the time to consider how best to carry out tasks in advance to reduce the risk of costly mistakes and increase cost effectiveness. Set the customers’ expectations correctly and take care to ensure suppliers quote for everything you need, nothing more and nothing less.

7. Keep it simple. One of the hardest things in business is creating and maintaining a simple business model. It’s really tempting to allow complexity in. Resist this with all your might. To me a profitable business is generally a simple business focused on doing what it does best and very little else.

8. It’s relationships stupid! Never, ever forget that business is in the end only about people. Build a strong team, get them engaged, use their skills, keep them focused, enlist their help. Do everything you can to optimise the relationships you have with customers and suppliers. Work hard to build trust. Bend over backwards to be helpful and fair. That way more and more people will be on your side, happy to help you become successful. You cannot do it alone!


Ian Baxter is a former Linklaters finance lawyer who left to become Managing Director and co-owner of RH Freight, which he built up and ran successfully from 1995 until its sale in 2011 to Kuehne & Nagel, for more than £60m. Following the sale, Ian spent some time away from business, travelling with his wife and children, before deciding to return to the industry to form Baxter Freight in January 2014.