You have two options to make your business more profitable in 2008: Increase revenue or decrease expenses.

I have compiled a list of the top 10 items that I have recommended to my clients. Feel free to e-mail me at crader@radersolutions.com with any comments, questions, or feedback.

1) Increase your inventory by one turn. If you increase your inventory by one turn, you will free up cash and you can use the additional money elsewhere. Determine your turns by taking your cost of goods sold (COGS) for the last 12 months divided by the average inventory value over the last 12 months. For example, if your current 12 month average inventory value is \$1 million and your 12-months COGS is \$6 million, you have six turns. If you take \$6 million and divide by seven, your new inventory value will be \$857,143. This is \$142,857 less inventory dollars than six turns. The 2007 Cost of Doing Business Report stated average turns for a typical dealer was 8.17 turns. Do not include special orders or direct shipments in this calculation.

2) Reduce Your Inventory Shrinkage. A rule of thumb is to accrue 0.5% of sales for shrinkage. This means that if your sales are \$10 million on annual basis your inventory allowable inventory shrinkage is \$50,000. I say, "Baloney!" This is too much. If you are the inventory manager, shoot for 0.5% of the inventory value. With sophisticated software systems, cameras, and well-trained employees, your inventory shrinkage should be much less.

3) Implement Transparent Pricing. On average, I am seeing people achieve a 2% increase in margins implementing by raising margins on "C" and "D" items. For more, see my column on How to Add Two Points to the Bottom Line Without Tipping Off Your Customers. 4) Implement Price Matrix Pricing. Traditionally, companies assign price levels to customers based on volume, customer type or required level of service. For example, if you have a roofer purchasing 90% of his product mix in your roofing category and he is on the lowest price level, move him to a higher price level on all other departments. If you move the price of his bottom 10% of items up 10%, you will achieve approximately a 1% increase in gross margin. On average, I am seeing a 1% increase by implementing this strategy.

5) Improve Employee Productivity. One example may be where your delivery driver has to make one more run on a Friday afternoon. Once it reaches 2 p.m., overtime pay typically kicks in. The result often is that, prior to the driver leaving the yard, you ask him to move fast, take short-cuts, unload the material and hurry back to the yard; only to penalize his time for the week. Meanwhile, the driver is thinking that if he takes his time, he will be compensated with overtime. My answer: Pay for performance, not for hours. The industry is going this way. I would not like to see you get caught with the nonperforming drivers in your market. For more, follow this link for Employee Evaluations .