Making sure your business is profitable and steadily increasing is key to growing at the pace you’ve outlined in your business plan and meeting your marketing goals. If your revenue sheet has flatlined or taken a dip, consider some of these tips to boost your profits.
The key to boosting profits is focusing on the elements that drive profits — namely income, expenses and sales. Following some or all of these steps can help you make sure you have all of these elements covered:
If you’re charging too much or too little, you could be missing out on customers or not bringing in as much as you could. Underpricing your products or services can also make people suspicious of the quality of your product.
Make sure you’re hitting the sweet spot with your prices by asking the following 2 questions:
How much are customers willing to pay? Run research on how much your target audience would pay for the product or service you sell. This could include doing a survey, running a focus group or other strategies you used when writing your marketing plan.
What are your competitors charging? Refresh your competitor research to make sure you aren’t a huge outlier in the market. If you are, make sure that price difference is something the customer can easily justify.
2. Calculate your exact costs
Sit down and calculate the total cost of running your businesses, including fixed and variable expenses. If you don’t have an accounting department, consider hiring a freelancer to run your numbers so you get an estimate that’s as accurate as possible. Weigh this against your revenue to make sure your prices are high enough, and use it as a starting point to cut down on costs or increase your sales.
Make sure to take into account any outside cost-saving measures. For example, several types of credit cards can help you save on certain areas of spending. These include:
Low purchase rate business credit cards. You can reduce interest on your business purchases with a low interest business credit card, so long as you pay off your balance regularly including any transferred balances transferred from another card.
Balance transfer business credit cards. A balance transfer business card will let you move some or all of debt on an existing card account over to one with a 0% interest period. This can lead to big savings if you previously used a credit card for big purchase periods.
Take a look at your business costs to determine what can be streamlined and what should stay the same. Consider factors like whether you’re spending more time or resources than necessary on one area, combining teams and strengthening channels of communication to make it more efficient. Cut out redundancies when possible.
Consider asking your employees in an anonymous survey where they think time is being wasted, since they’ll have a different perspective than management.
4. Switch up suppliers
Research other companies in your supply chain — like vendors and manufacturers — to look for a better deal. If you find one, consider switching to a new company.
And don’t be afraid to negotiate with a new company, either. Ask about discounts or a reduced deal before you sign any paperwork.
5. Outsource when you can
Outsourcing is another strategy you can use to lower your business costs. It can often prove to be much cheaper than hiring full-time employees to complete certain tasks. By finding new ways to reduce your business expenses, you can price your products competitively while increasing sales and profits.
6. Negotiate a better deal
Don’t be afraid to try to negotiate for lower costs with your suppliers or manufacturers on the goods you plan to later resell. Lowering the cost of goods from suppliers will not only increase your net profit, but can also enable you to possibly sell your products at a lower price. This can increase demand for your product and services, which can improve business for you.
Hiring and training new employees can often be an expensive, time-consuming process. But it’s important to have a good working relationship with your team members — this includes encouraging them to share ideas for the business, coaching them in areas that they’re struggling and asking questions to find out if they’re satisfied in their work.
Constantly improving your company culture can not only lower the costs of frequently employing new people, but also inspire loyalty among your employees to go the extra mile.
8. Open new distribution channels
It goes without saying that increasing your sales is a sure-fire way to increase your business profits. In order to increase sales, you should try to open up new distribution channels if possible. For example, a lot of consumers are now shopping through online websites as opposed to in stores.
9. Incentivize efficiency
One way to increase the strength of your sales force is to offer your employees higher commissions and incentives for bringing in new sales. Bonuses for exceeding goals can also motivate other team members to carry more than their weight. Or make it fun by having an annual awards ceremony that comes with small prizes tied to revenue.
10. Rely on analytics
Increasing your sales goes hand in hand with managing your marketing costs. Use data analytic tools to understand trends among your customers and implement marketing strategies that cater directly to consumer demand. If you use marketing campaigns for paid advertisements, identify what’s working and focus more of your resources on that, while eliminating campaigns that don’t turn a profit.
11. Continually look for areas to expand
Growth isn’t just for new businesses and startups. Regularly assess whether your bottom line is cramped because you don’t have the resources to keep up with demand.
Also, consider expanding into new areas if you find a new niche in your market that the competition hasn’t snatched up yet. It might even be worth taking out a business loan to fund the upfront cost — just make sure the return on investment makes it worth it.
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Cutting back on expenses, adjusting prices and upping your sales are key to increasing profit. Make a habit of regularly assessing where you can improve, streamline and expand to make sure you’re continuing to bring in the highest revenue you can.
Increasing revenue is one strategy you can use to increase profits, along with cutting down on costs. If you don’t increase your revenue, you might not be able to fund the resources you need to provide a quality product or service.
Not necessarily. It can depend on your business model. Some businesses do better if they create a loyal following with their current customers rather than spending resources on trying to get more customers. But you can also increase profits by cutting back on expenses and not making changes to your customer acquisition strategy.
Yes, there are several ways to increase profits without upping prices. These include expanding your customer base, cutting back on expenses and focusing on retaining the customers you already have. But take a look at your expenses and the state of your business’s market before ruling out increased prices — in some cases, it might be just what you need.
Kyle Morgan is a writer and editor for Finder who has worked for the USA Today network and Relix magazine, among other publications. He can be found writing about everything from the latest car loan stats to tips on saving money when traveling overseas. He lives in Asbury Park, where he loves exploring new places and sipping on hoppy beer. Oh, and he doesn't discriminate against buffalo wings — grilled or fried are just fine.
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