How to Increase Your Company's Profitability

The whole reason a business exists is to maximize shareholder profitability, yet this is not an easy task! Here are some practical suggestions to maximize profitability for any type business.

Instructions

Difficulty: Moderately Challenging

Things You’ll Need:

• Last month's statement of accounts
• A PC with an Internet connection
• Suppliers' phone numbers
• A solid competitive analysis done by your marketing department

Where Can You Cut Costs?

1. Review the statement of accounts to see if there are any overhead expenses that seem excessive, or that could be trimmed. If so, make an immediate plan to trim them.
2. What did the company pay in phone costs? If this is a large expense, you might consider moving to a VoIP service such as Packet 8 which allows unlimited calls per extension for one low fee (see Resources below). Do a payback analysis to see how long it would take to recoup the costs from the capital purchase of the new phones. It also pays to check the network for VoIP readiness using a simple kit from Packet Island.
3. If IT expenses are high because the network has issues, call in a fresh pair of eyes to look for root cause. Are employees using peer-to-peer programs to download music, and causing network congestion? Was the network poorly designed from the start? Rectifying these issues now can save costs in the future.
4. Check the energy bills. If they are high, then put out a memo asking all employees to turn off lights and shut down computers before leaving.
5. Excessive travel expenses can be managed by requiring that all employees check at least 3 websites before purchasing air travel, and circulating a list of suggested travel sites.
6. To curb excessive legal fees, search for freelance attorneys rather than well-known (expensive) firms. Also, ask if every document really needs to be reviewed before farming it out to legal.

Get More for Your Product or Service

7. Are you in a price elastic market? If so, prepare projections on how much more you could sell if you had a slightly lower cost from your suppliers. Set up a meeting, and present your proposal to those suppliers. Then decrease your prices slightly less than the suppliers decrease to you.
8. Review the competitive analysis carefully, and assess market share from each competitor. Are there "holes" in the product or service offerings that represent key features customers are willing to pay more for? If so, add these features at an incrementally higher cost.
9. Are there services you could offer along with your product? If so, develop them as part of the offering, and charge for them accordingly.
10. Develop a list of 10 things you could do to increase sales and put this plan of action into place immediately.

Tips & Warnings

• Be sure to monitor expenses in an ongoing manner to catch any spikes or unusual changes.