Airlines Use Capacity Reduction to Preserve Profitability -- sxc.hu/a51media

News from the world of air travel suggests that the cost of flying airplanes has surpassed the ability to support it, in many communities. The result is that “competition is decreasing, fares are rising and airlines are adjusting routes (and charging extra fees)” in order to extract the “greatest possible revenue per mile flown.”

If you’re a small business owner or entrepreneur facing difficult times, you’re probably wondering what you can do to make the ”greatest possible revenue.”  Two mistakes to avoid are to assume things will stay the same and that your business can adapt to new circumstances as they happen. Your best chance for survival is to take advantage of opportunities (such as competitors failing) by reducing your vulnerability.

Fix What is Wrong

In my previous blog, “Don’t Let a Short-Term Crisis Cause a Long-Term Headache,” I wrote about the importance of planning, specifically, planning that your business will be around in 10 years time.

To do this you need to fix what is wrong with your business now, whether that means decreasing costs and spending, or putting more time and effort into sales. Make the decisions that will improve efficiencies.

Set Targets You Can Monitor

If you haven’t already done this, now is the time to work with your accountant to select some key performance indicators (KPIs). Whether you use gross profit or net profit margins, choose figures that will enable you to measure the performance of your business against industry standards.

Watch Operating Costs

It’s easy for everyday costs to get out of hand, if no one is monitoring them. Advertising, supplies, utilities and such, might not seem important. But your small business can reduce the small costs that nibble away at your profits just by taking steps such as saving electricity (turn off lights) and reducing waste (recycling).

Reduce Your Debt

Now is not the time to carry lots of debt. Find ways to achieve a more balanced portfolio with the right loans and investments. One smart move is to preserve cash.

Cash gives you leverage so that you can take advantage of opportunities as they arise – like buying out a struggling competitor, perhaps. Consider ways to free up cash such as selling under-used assets or keeping other assets for longer (like your car).

As a small business owner or entrepreneur, it is in your best interest to follow the lead of the airlines by taking steps to preserve your profitability. That may not mean you’ll be adjusting or cutting routes, but there are plenty of ways to reduce overhead costs and debt, increase your cash and monitor performance.

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