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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:
1. Remove Unprofitable Products and Services
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.
2. Find New Customers
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.
3. Increase your Conversion Rate
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.
4. Review Current Pricing Structure
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.
5. Reduce your inventory
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.
6. Reduce your overall direct costs
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.
7. Reduce your overheads
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.
These strategies may sound like simple steps, but being able to effectively manage your finances and execute it, is hard. We recommend seeking assistance if you are unsure how to get started. Our business coaches have the knowledge and experience to be able to help you develop and implement your business goals.
We have designed this four-part workshop to give you the practical tools to help you reach your business goals. Our Director, Andrew Mattner will share the same key principles that he has used to build and scale seven businesses, including four start-ups.