Simple Ways to Increase Small Business Profits
If you want to increase the profit in your business you need to do this one thing . . .
Alas, every business is slightly different. It would be great if we could say to every small business owner, “you should all do this, exactly this way, to increase your profits.” The problem is that whatever “this is” some of you already doing it, and some of you couldn’t do it even if you wanted to.
You, as the owner, have to find a way to increase your profits. (Unless, of course you are the problem, as was the case for me and the Embarrassing Reason why My Business Was Unsellable.)
The good news is that there are many tried and true techniques that have been used, and proven to work to increase small business profits. Take this Inc. article by David Finkel that highlights 30 different options. The full article gives solid insight on many of the ideas listed below.
- Increase pricing.
- Redesign workflows and systems for greater efficiency.
- Eliminate tasks and activities that don’t add value to the company or customer.
- Give your team a clearer picture on ways they can contribute to profitability.
- Regularly review your administrative and operational staff levels closely.
- Look for ways to increase value to clients and customers.
- Increase the dollar value of every purchase transaction with your clients.
- Beware the steep cost of attrition.
- Feed your winners; starve your losers.
- Feed your winning sales people more leads (even if that means you starve your lower performing sales people of leads.)
- Renegotiate with your landlord.
- Focus your best efforts, talent, and attention on selling your most profitable products, services, customers, niches, or channels.
- Strategically map out a pathway to upgrade your top 10-20 percent of clients to “red carpet” or “highest value” offerings.
- Look for ways to bundle products and or services so that you increase the average ticket price of every sale.
- Sell your product or service in larger purchase sizes.
- Strategically consider giving pricing or other incentives to make the purchase and use of your product or service in larger unit sizes compelling.
- Strategically map out systems to help your customer consume your product or service faster so that they get more value and hence repurchase more frequently.
- Make buying from your easy and simple.
- Shift a cost from a fixed to a variable expense to give yourself greater flexibility.
- Shift a cost from a variable to a fixed where the value is proven.
- Consistently look for ways to lower your fixed overhead.
- Stabilize your production systems so that you can reduce need to stock as much inventory and raw materials which are a drag on your cash flow and on your gross profit margins.
- Consider buying “off-the-shelf” versus designing or developing a tool (e.g. software, machine, etc.) from scratch.
- Negotiate hard.
- Specifically — negotiate and get competitive pricing on your merchant accounts.
- Beware “hidden” R & D costs for pet projects and bright shiny opportunities that don’t match up with your company’s strategic plan.
- R & D is not just a tech or pharmaceutical company line item.
- Get clear on all the costs of inventory: cost of capital; storage; insurance; etc.
- Consider selling off or writing off old inventory.
- Set optimal inventory levels and stick to them.
- , but we can help by providing occassional articles like this one that provide a brainstorming list of options to consider. Find a way to increase your profits!
However you do it, you need to increase your profits. It’s key to improving your ability to sell your business when you are ready.