Continuing our discussion on cracking the profitability code, in this unusual article, I will be sharing some very simple tips you can immediately put to use in your business to increase profitability.
It doesn’t matter whether you are a small startup or an international corporation; every business is looking to grow its profits.
So when it comes to increasing your profitability in business, after considering both the universal laws of profitability and the peculiar elements of profitability, there are two simple options open to you;
1. Increase Revenue [sell more]:
There are several ways to increase revenues. To apply this profit maximization option, here are four things you can do;
- Firstly, increase the quantity of sales, for example by better marketing the product or improving quality. Analyze where money is majorly coming in from and focus on making more sales in those product/service categories.
- Secondly, up-sell to existing customers, for example by persuading them to buy enhanced services or accessories.
- Thirdly, diversify into selling a wider range of products.
- Fourthly, revise pricing to produce a more efficient balance of the number of sales and the revenue from each sale.
2. Decrease Expenses [cut costs]:
There are also several ways to cut costs. To apply this profit maximization option, here are four things you can do;
- Firstly, analyze where money is being spent. Overhead is one of the biggest categories of expenses that business owners face.
- Secondly, negotiate cheaper prices for supplies, particularly when buying in bulk.
- Thirdly, make the manufacturing process more efficient, for example by breaking it down into individual tasks and setting up a production line system. Improving your business processes can reduce wastages financially. Always adopt time saving and production boosting technologies.
- Fourthly, buy equipment you currently lease, or lease the ones you currently need to buy or do a hire purchase. Assessing costs here may require taking a long-term view.
5 More Easy Ways To Increase Your Business’ Profitability
The following 5 simple tips cover both profitability options discussed above depending on the peculiarity of your business situation, enjoy!
One of the biggest sources of expenditure for businesses is human resources. Because no entrepreneur can do all that is required to move their business forward, there’s always a need for talented people in every company, big or small. But for majority of small business owners, you don’t have to employ all the talents you need on full time.
No matter what type of business you are in, you probably have work that can be outsourced for a minimal fee. Look for strategic partners who can offer certain freelance or outsourcing services on a pay-as-you-go basis. Design projects, press releases and website content are all things you could stop doing in-house. Focus your full-time employees on revenue-building projects and send simple tasks out for freelancers to complete.
By so doing, this will reduce your overhead expenses and increase your profitability!
2. Raise Your Prices
One of the easiest ways to maximize your profits is to increase your prices. Having a good business is not all about offering the lowest price. Sure, it’s what some people may be looking for, but for many, quality and customer service are equally important.
If you have a superior product, don’t shy away from charging a superior price. You may lose a few customers at first, but studies show they are likely to return for a quality product or valuable customer service options.
I discussed more about this profitability option in this unusual article; COMPETITIVE STRATEGY: How To Win The PRICE War
Also, review your cost structure. Make sure you have a sufficient markup on your goods. When the cost of raw materials and related costs increase, the additional costs need to be included in the selling price. Reviewing your cost structure on a regular basis will help you keep track of costs that are on the rise before the cost is too great to completely include in your selling price.
3. Find A New Energy Supplier
Energy is an expense that every company has to deal with. Trust me; I know how much I spend on power monthly. It is one of the key areas where recurring expenses flow; so if you haven’t shopped around for energy rates lately, it could be costing you.
When we ran our cybercafé business, energy or power was one of the key areas that depleted our revenues. In our first year alone, we spent over 1 million naira on energy! Just imagine if some portion of that cost could be saved and converted into profits for the company?
In developed countries and deregulated areas, businesses are able to choose their own energy suppliers, such as Reliant Energy. Many suppliers offer competitively low rates that might be better than what you’re currently paying. And if you are looking to make your business more sustainable, many suppliers offer green energy made from wind and solar resources.
The most important takeaway is that even a penny difference in energy prices can have a significant effect on your bottom line!
4. Borrow Best Practices From Others
Your business model does not have to reinvent the wheel; you can always copy best practices from others, especially from outside your industry. Find out what’s working for your competition or similar companies and implement it in your business. There is nothing wrong with having a business model that works well, even if it is similar to another company.
Just find a way to differentiate your offering [product/service]. If a competitor is excelling with customer engagement, mimic it. If it is using different technology, look into it. Don’t be afraid to take others’ ideas and strategically mold them to fit your company.
Take a look at this unusual article for more insight; Competitive Intelligence: 12 Sure Fire Ways To Strip Your Competitions Naked!
5. Educate Potential Customers
If people don’t know about your awesome company, then you may have a problem increasing profits. In the age of digital media, it’s just silly not to have an online presence. Create a website, join Facebook and blog about your industry. Let everyone know about your company and how great your product is.
Take it one step further by creating advertisements for your company. Choose mediums that your ideal customer would be using. TV, radio, print and online are just a few of the many places you can advertise. Once you have gained attention, work on engaging your customers. Create relationships that will keep them coming back for more.
Over To You
What other profit maximizing options have you applied in your business?
Participate by leaving your comments below, thanks!