Many business owners think you need to increase sales substantially to make more money.
But often that’s too difficult, especially in the short term.
So it’s a GOOD THING that there is another way to make more money – increase your profit margins.
So you might ask yourself
“How do I increase my businesses profitability?”
It’s a great question.
Below we have a list of 29 simple tips to increase your profits and profit margin. They work, if you put them into practice.
Our 29 Tips to Increase Your Profits
- Increase pricing.
Most businesses set their prices when their business is first launched, where they often set their pricing levels low.Over time, the business likely only made nominal increases to pricing every few years, but rarely did the owner ever sit down and fundamentally rethink their pricing model. If it’s been over a year, time to look at it again.
- Redesign workflows and operation systems for greater efficiency.
- Eliminate tasks and activities that don’t add value to the company or customer. Every dollar you save by eliminating the cost of things that don’t add value increases your bottom line.
- Give your team a clearer picture on ways they can contribute to profitability. Empower them to be part of this search for ways to increase profitability.
- Regularly review your administrative and operational staff levels closely. Most service and administrative departments can be cut by 1 in 4 with no impact on quality of work. have a detailed look often.
- Look for ways to increase value to clients and customers. This will help you shorten your sales cycle. By increasing your closing rate, and focus on customer retention.
- Increase the dollar value of every purchase transaction with your clients. Think up-sell, cross-sell, and resell.
- Starve The Ponies (Losers) and Feed The Stallions (Winners). This is important in your marketing, sales force, general staff, company initiatives, etc. So cut your losers, and feed a portion of the saved time and money into your winners. This will greatly boost your profitability.
- If you have sales people then feed them more winning leads. Audit the “$ value per company generated lead given to a sales person.” This is not a time to be “fair”, but to be strategic.
- Renegotiate with your landlord.
You’ll never get what you don’t ask for. Have a heart to heart with your landlord about reducing your lease rate with a clear deal in mind. Even if they say no you can always give them a fallback request to give you an option to extend your lease without an increase in rent.
- Focus your best efforts, talent, and attention on selling your most profitable products, and services to customers in the right niche with the right channel.
- Strategically map out a pathway to upgrade your top 10-20 percent of clients to “high ticket” offerings. They want this service, will value this service, and will pay for this service.
- 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. For example, larger unit sizes can be quiet 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. Look for ways to educate them on the ideal use of your product or service.
- Make buying from your easy and simple. Reduce barriers to entry. Reduce frustrations or hurdles to re-purchase.
- Shift a cost from a fixed to a variable expense to give yourself greater flexibility. This is a way to protect your cash flow. It is extremely important for the unproven tactics and strategies.
- Shift a cost from a variable to a fixed where the value is proven. Make this shift only when you can negotiate a substantial price savings by doing so.
- Consistently look for ways to lower your fixed overhead. Scrutinize your base expenses to eliminate non-strategic expenses at least every 3 months.
- Stabilize your production systems so that you can reduce the need to stock as much inventory and raw materials. Thus reducing the 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. Unless you are in the business of designing exactly those types of tools you’ll almost always find your estimates of the cost to build from scratch are hundreds of percent too low.
- Negotiate hard. Plan out your negotiation strategically. Research the suppliers. Even hire an experienced negotiator to help you make the purchase on the best price and terms you can. If the asset you’re buying for your business is large enough, the ROI on your negotiation work can be immense.
- Specifically — negotiate and get competitive pricing on your merchant accounts. This one tactic will likely yield an extra .25-.5 percent to your bottom line with very little effort.
- Beware “hidden” Research and Development (R & D) costs for pet projects and opportunities that don’t match up with your company’s strategic plan. Be Smart!
- R & D expense is incurred in the process of finding and creating new products or services. If you work on new ways to create a product or service that you will one day, “down the road” sell to the market, YOU have R & D. Be strategic about where you invest your businesses dollars.
- Get clear on all the costs of inventory: cost of capital; storage; insurance; etc. This will help you make informed stocking levels.
- Consider selling off or writing off old inventory. Why pay to store stuff you really don’t have a use for. Sell it; donate it; scrape it.
- Set optimal inventory levels and stick to them. Lookout for ways to safely reduce your inventory levels with reducing quality to customer.
- Increase pricing.
There you have 29 simple ways to increase your business’s profitability. We wish you the very best in implementing these tips into your business to increase your Profit-Margin.
Learn more techniques like these for improving the profitability of your tradition business or create a profitable online business by clicking on this link now.
Nicky and Dave