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Profit Maximization: Strategies To Make Your Business More Profitable

Tito Philips, Jnr.By 256 Mins Read

six sections business diagramContinuing 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!

1.     Outsource

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!

Share.

Hi! My name is Tito Philips Jnr, an unusual Nigerian that is MAD – Making A Difference. I'm the Chief Community Leader here and this is where we raise the bar of entrepreneurship. We are a TRIBE of Unusual Entrepreneurs, we are not your every day entrepreneurs who go into business to put food on the table and pay bills. For us, business is more than making ends meet [survival]. It is our means of doing what we love [passion], changing the world [purpose] and being financially rewarded for it [profit]™. Want to become ONE of us?

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View 25 Comments

25 Comments

  3. Emilio Peire on

    Lots of good stuff here as usual Tito. I am often amazed at the wastage and inefficiencies that are present in outwardly successful businesses. Why wait until your business has cash flow problems or until sales are down before embarking on cost saving exercises. Strategic cost reduction, especially in purchases relating to Non-core business, is often overlooked. It should be an ongoing activity for every business, not only entrepreneurs, because it can significantly improve the bottom line.

    • Tito Philips, Jnr. on

      I agree with you Emilio, often the result of wastages that reduce profit come from non-core business expenditures. It pays to have a strict spending policy that helps to match every expense to only core business areas or functions.

      Robert Kiyosaki puts it so well “there are good expenses and bad expenses; good expenses makes you more money down the line [assets] and bad expenses costs you more money down the line [liabilities].”

      Thank you Emilio for the awesome comment.

  5. Ojobor on

    I’v gained a lot from this write up. All the points are worth looking into, for me especially point 2 cos I’v always thought. ‘Raising your price’ isn’t a good strategy. But now I know if you ‘v quality products plus customer service and good delivery, you dnt have to panic. Thanks Tito

    • Tito Philips, Jnr. on

      Thanks Ojobor,

      Never compete on price, compete on VALUE!

      That’s the secret to increasing profitability by charging more. Load your products/services with so much benefits and put yourself in front of those who can’t resist those benefits. The more benefits your products/services have higher than the general market, the more price it will attract. It’s that simple, those who want more will pay for more; your task is to clearly and practically communicate your SUPERIOR value offering!

  6. Chadrack on

    First, congratulations for the come back. It’s a glad thing to see that nothing was lost despite the site going down for so long.

    On this article, I must say this is really an insightful post. Every strategy here is one that when applied will definitely add to the profit margin of any business.

    Thanks for sharing.

  7. Ellie Sedighi on

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    CEO
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    Ellie.Sedighi@SaveAStranger.com
    W: (866) 691- 4245 Ext. 700

    C (949) 633-2154

  8. Christine on

    Thank you for the fantastic and most generous content. once again you over deliver for your readers. I do enjoy reading your blog posts and take inspiration from them .Profit maximization is basically the process of investing time, energy, and resources into those products and services that generate the most income.

  9. Bizsuccess on

    Tito Philips, i must say you are a good entrepreneur who knows what is talking about. This is a great post. Profit maximization is very important in business, because the main purpose of doing business in the first place is to get profit. So, this is a timely advice for the wise entrepreneur to utilize.

  11. Jasmine on

    Another way to increase profit is to monitor your business plan, because your plan is the most accurate guide for you to achieve your goals. While monitoring your plan you also need to balanced the everyday operations and if there is a need to change the course of plan do it so. You may also consider getting a business expert like Mind Strategics Learning Consultancy where you could learn the habits and mindset of a millionaire entrepreneur.

    http://www.yourmindstrategy.com/expertprofits.html

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