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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 two questions:
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 is 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:
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.
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.
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.
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.
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.
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.
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.
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.
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.
You can 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.
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