Success is often measured by increasing profitability of a business. A business can feel stagnant if the profitability isn’t increasing. There isn’t a need to make massive changes like hiking up prices or cuts such as reducing headcount. You can make small changes through various methods that will aid your business and boost your profits. As a small business owner if your year-on-year profits aren’t rising, or at worse, are decreasing then you will seriously need to look at other strategies to increase them. Increasing business profitability is realistically going to be a slow process so don’t expect instant results. However by making small, manageable changes to your costs you will begin to see an increase in profit margin. The following are some ways you can increase your business profits.
Cutting costs is the most obvious way to increase profits but you have to ensure you don’t compromise on the quality and delivery of your products and services. There are several different ways in which you can cut costs:
- Do your own marketing. If you are an established business, then you will know what marketing techniques work best for you. Don’t waste time on marketing that doesn’t produce leads.
- Hire part-time staff instead of full-time staff.
- Save on your electric bills. This can include turning off computers when not in use, to going fully paperless in the office.
- Create a budget and stick to it strictly to save money. It will also determine the areas where you’re spending unnecessarily and can plan where to cut costs.
As a business owner, you may be hesitant to increase prices due to the risk of unhappy customers. However, by increasing your product or service prices by 5-10% should unlikely prove any market resistance. If you provide a quality service or product, with great customer service, your customers will not mind a slight increase in prices. Simply ensure you aren’t increasing prices too often and that you don’t increase prices higher than 10%.
This point may seem obvious and you might feel you are currently selling as much as you possibly can, but keep in mind that you can always improve and sell more. There are many different techniques you can use to increase your sales. For instance, offering an annual plan for a gym membership for a cheaper price than pay-as-you-go. This gives the customer an incentive to join a long-term membership ensuring a steady income for your business. You can also offer “cross selling” where you offer your customers complimentary products to the ones they are currently purchasing. Another way is “up-selling” where you aim to sell the premium version of the product your customer is already buying.
Expansion and business growth should always be a prominent thought in a business owner’s mind as, in theory, expanding your business will help your profits. You can expand by developing new products and services. Of course this will require spending money first but this initial investment will prove worthwhile in the future profits of your business.
In addition, ensure that you are aware and keeping an eye on your competitors. You can find effective and fresh ideas for new products by looking at what your competitors are selling and what is proving successful for them. It’s important you don’t simply duplicate, it’s best you add to an existing idea.
Ensure that you are doing everything to boost the productivity in your workplace in order to make more money. Especially if you work in sales, if your employees work harder and more efficiently then you will achieve instant results. You can motivate employees and improve productivity by offering incentives. For example, you may decide to offer additional time off or early finishes if they achieve a certain amount of sales.
Keep staff informed
Improving profitability through saving money needs to be a team effort therefore you must keep your staff informed. Maintaining staff involvement is crucial and may prove beneficial in forming new ideas to improve profits.
It is important to perform regular reviews of your finances. Keeping an eye on your budget and revisiting it regularly can help you really see where you can cut costs. Consistently looking at your sales figures will help you see the overall picture and patterns allowing you to make effective changes.