How to increase your profits
Every business should want to increase their profits. Firstly profit is the amount of money that is left over after you have paid out all your business expenses...which includes your salary.
So how do you increase your profits?
There are two ways to increase profits - you can increase your revenue or/and decrease your costs.
Ways you can increase your revenue are:
- Increase productivity - This could mean making your workers work smarter or/and harder. Buy faster IT equipment - staff using antiquated software and computers could be wasting time.
- Add new product lines - Try to add new products and services which complement your existing portfolio. Using your existing customers you can sell new lines very quickly.
- Add to your customer base - Have you tapped into all the potential customers - clearly this can be a difficult thing to do as most businesses are striving to get new customers. Is it possible to find new market areas to sell your products and services?
- Increase your prices - Obviously if you sell the same amount of stuff at a higher price you will make more profit. Of course selling at a higher price might stop some customers buying - on the other hand some customers may be thinkking your prices were too cheap beforehand and may not have purchased from you.
- Customer service - Always make the customer feel really good about the products and services you provide, they are more likely to come back to you or recommend you to their friends and family.
- Have a sale - People are always on the look out for bargains it seems so having a sale is a good way to promote your products and services. It's also a good way of converting old stock into cash
- Increase sales - By selling more stuff you will increase your sales and hopefully profit. Can you display your products and services better? Do you have lines of products which are slow movers - if so why are they moving slowly? Is your sales team up to scratch - who are the worst / best sellers in your sales team - what are they doing right / wrong?
- Sell more profitable products - Isolate your most proftable items and sell more of them - focus your marketing more on these products - it could be that you've spread yourself too thin and not everyone knows that you actually sell or provide the service for this great profitable product. Can you sell this product in a different way to encourage more sales?
- Take Credit cards - By taking credit card payments you are more likely to increase your sales because people are more likely to spend bigger on a credit card than with cash.
Ways you can decrease your costs are:
- Decrease inventory - Avoid having your money tied up in stock, stock can depreciate in value (of course it can also go up in value as well). Your stock usually takes up space which could be used for faster moving stock, or could be used to purchase faster moving stock. This is especially true if you are having cash flow issues.
- Decrease stock costs - Are you getting the best price for your stock? You could save a fortune in looking at new suppliers.
- Decrease waste - This can be in the physical sense such as paper going into landfill which could easily be used to scribble on for example...old IT equipment going into landfill rather than being re-used by people who are happy to have old IT equipment - I'm sure you've heard the phrase - one man's trash is another man's treasure. The other waste is when employers waste time or waste resources which could be turned into products - this comes under the same headline as increasing prodctivity to some degree.
- Decrease overheads - Can you save energy - do you leave all the computers on over night, the lights on? Do you have energy saving devices? Are you getting the best deals on your electricity, water, rent?
Once you have chosen strategies to increase profits - prioritise them to make sure you increase your profits faster.