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.
How to increase business 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:
1. Run a price audit
If you’re charging too much or too little, you might be missing out on customers or bringing in fewer than you could. Underpricing your products or services might 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 two 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 to get as accurate an estimate as possible. Weigh this against your revenue to ensure your prices are high enough, and use it as a starting point to cut down on costs or increase your sales.
Take into account any outside cost-saving measures. For example, several types of credit cards can help you save on specific types of spending. These include:
- 0% purchase APR business credit cards. Completely avoid interest on your business purchases with a 0% purchase APR business card, as long as you pay off your balance before the end of the intro period.
- 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.
3. Streamline and change up procedures
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 to help lower your business costs. It can often prove to be much cheaper than hiring full-time employees to complete certain tasks. When you find 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 resell later. Lowering the cost of goods from suppliers will not only increase your net profit, but could also enable you to possibly sell your products at a lower price. This can increase demand for your product and services, and improve business for you.
7. Invest in employee happiness
It’s typically an expensive, time-consuming process to hire and train new employees. And having a good working relationship with your team members is vital — this includes encouraging them to share ideas for the business, coaching them in areas that they’re struggling and asking questions to learn about their workplace satisfaction.
Constantly improving your company culture could lower the costs of employee turnover, 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. If possible, open up new distribution channels to increase sales. For example, many consumers are now shopping through online websites as opposed to physical stores.
9. Incentivize efficiency
One way to increase your sales force chutzpah 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 lack 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 — but make sure the return on investment makes it worthwhile.
Compare business loans
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 possible revenue.
Learn more about how to keep your revenue reports up and to the right with our guide to keeping a positive cash flow. Or check out our guide to business loans to learn how to make a smart choice when you need financing.