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Making your business more profitable involves looking at ways to increase sales revenue as well as decreasing your costs and benchmarking your business to see where you can save money.
Here are seven effective strategies to improve profit:
The products or services with the highest gross profit margin are the most important to your business.
Once you have identified your most profitable products or services you should concentrate on these. You will need to determine if the unprofitable products or services should be removed completely or reviewed for areas of improvement.
New customers can help grow your business. However, this can sometimes be the most expensive strategy for generating additional revenue. On average it costs eight times the amount of money to acquire a new customer as it does to retain a current customer.
The simplest (and most cost effective) way to get new customers is to offer incentives to your current customers and motivate them to initiate referrals for you. Word of mouth is the most powerful form of advertising.
Generating new leads is an important part of business growth. But do you know what percentage of these leads eventually convert to a sale? Increasing sales conversion in your business is one of the fastest and lowest cost methods to boost your business profits.
Raising prices can be a terrifying prospect; however a small increase in your prices can make a significant impact on your gross profit.
Therefore, correct costing of your products and services is very important. You should review the costing of your products regularly and adjust your prices accordingly.
Stock control is a good way to streamline your business and improve cash flow.
With less money tied up in slow-moving inventory and fewer losses due to expired or discontinued inventory. Ordering more frequently allows you to compare prices and take advantage of seasonal clearance or overstock discounts.
Reducing your overall direct costs will have a significant impact on your gross margin.
One way to reduce your direct costs is to negotiate better prices or discounts for everything you buy. Provided the quality is comparable finding the best prices may require finding a new supplier.
Another way to reduce your direct costs is to eliminate unnecessary purchases. A thorough review of your direct costs should highlight any areas where overspending has occurred.
For many businesses overhead expenses have a way of creeping up over time. Regular review of your overhead expenses is a simple and effective way of improving your net profit. Benchmarking your business to similar businesses in your industry may highlight areas for improvement.
Phillip Cross, Royce Cross Agencies
Rodney Quinn, Quinn Transport