Money’s at the heart of all business.
Indeed, 29% of new businesses fail because of insufficient funds in the bank. Clearly, no money means no business. It’s as simple as that.
Maximising capital gains will forever be key to company growth and success. For that reason, the number one goal for every business owner is to increase profit margins wherever possible.
But you know that already. The real question is how to do it. In a competitive world, generating revenue can feel like an uphill struggle. It’s natural to need some inspiration at times.
Are you looking to cut costs, drive revenue and boost your profits? We want to help.
Read on to discover 8 steps to increase profits this year.
1. Calculate the Current Situation
It’s time to get real.
The first step to profit progress is understanding the current state of affairs.
In other words, you need to calculate the gross profit margin you’re working at right now. Make sure you’re not looking at last year’s spreadsheets either. You need to be as up to date as possible.
Speak with your accountant to check how last month’s income and expenditure.
Think of this in the same way as trying to lose weight. Calculating your profits is like stepping onto the scales for the first time:
You might now like what you see! But you’ll come away with an accurate idea of how much you need to improve.
2. Get a Benchmark
This tip’s an extension of the last.
Now you know your business’ profit margin, it’s time to compare it to the average margin in the industry. Take a look at your competitors to understand where you rank by comparison.
Knowing how your business stacks up will reveal its relative success/need for improvement. If your margin’s lagging behind, then you attain a benchmark to work towards.
Of course, an overall profit statistic is only so helpful.
Try calculating the level of profit for individual departments, products and services, and so on. Certain areas could be performing better than others. Honing down in this way will highlight where your profit-boosting endeavours should be focused.
3. Raise Your Fee
Don’t undersell yourself.
Are you pricing your business according to its true value? If not, then it’s time to ask for more money in return. Think about the last time you raised your prices; look at how your competitors are priced.
Prices naturally increase over time; prices should be in line with the market. It’s a fine line though. Expect to lose some customers in the process of increasing your fees.
However, that same fee increase should pay for the loss and return even greater sums at the same time. The irony is that you might also attract more custom!
After all, a premium price carries expectations of quality. Assuming your product/service fits the bill, asking for more money can lead to an upturn in business.
4. Charge Certain Customers Even More
Here’s a quick one:
Not all customers are created equal.
Some will have access to far more capital than others. You could consider pricing your products and services accordingly. Charge wealthier clients higher prices!
5. Avoid Undercutting
Competing with other businesses on price is a recipe for dwindling margins.
It becomes a downward spiral of ever-lessening returns.
You know what it’s like. Your competitor lowers their fee to drive more custom. In response, you match their asking price or undercut them further; they retaliate in kind.
The cycle repeats until nobody’s making any money!
Profits increase when you provide value by alternative means. Try to compete in other ways. Provide the best product on the market, offer incredible customer service, and master your marketing.
You’ll attract new customers and drive sales without sacrificing income.
6. Skip Damaging Discounts
Discounts hinder your profits too.
Discounts, promotions and sales are common tools of the business trade. Moreover, they can be a useful tool for driving sales and seeing a boost in profits.
However, they can backfire when overused.
Discounts should never be utilized as a primary strategy for sales generation. Customers come to expect those budget prices, making them unwilling to pay full-price at a later date.
Use sales strategically at certain times of the year. Try to create a name for yourself in the industry ahead of time as well. Sales always work better when customers are clamouring for your product in advance.
7. Keep Things Secure
It goes without saying that unnecessary losses should be avoided.
Theft and breakages are an instant way to slash your margins. Alas, theft is far too common in business, resulting in billions of dollars worth of losses every year.
Worse still, as much as 43.9% of it can arise from employee theft! Employees could be stealing millions in profits right from under your nose.
You can see how it pays (literally) to run a tight ship.
8. Hire the Right People
The potential for employee theft highlights the importance of hiring the right people.
It’s impossible to overstate the value of having motivated and conscientious staff members. For example, a happy employee is up to 20% more productive than an unhappy one. That productivity translates into greater income for the business.
A bad apple spoils the bunch too. Lazy employees with bad attitudes impact the overall morale of the team. Its effectiveness and income-potential suffer as a result.
Avoid this eventuality by hiring quality employees from the outset. Similarly, work hard to retain your top staff members! There’s nothing like high employee turnover to damage your reputation and income.