How to Increase Profit
Getting profit is the first step; increasing profit is the second. Once you have a basic profit flow established, there are two ways to increase profit: you can reduce your expenses or increase your sales. Both are important sides of the money equation in any business. Keeping an eye on your numbers and using creative marketing techniques can accomplish both and lead to increased profit.
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Instructions
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Get the numbers. You need to know where your business is financially before you can make any headway. So break out the invoices, the profit and loss statements, Quick Books, or your accountant's number and get the information. At a minimum, you need to know your total expenses (fixed and variable) and your total income (averaged if needed) in a weekly, monthly, and yearly time frame.
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From the numbers above, determine your current profit (which is, very basically, your total income minus your total expenses within a particular time frame). What is your profit percentage now? What do you want it to be in six months? In a year? In five years? Set some goals.
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Get a list of all your expenses and decide which ones can be eliminated or reduced. Where is most of your money going? Are you paying for a building you don't really need? Are you purchasing inventory at a high interest rate? Are your pouring money into advertising that isn't really working? Analyze your expenses and decide where money is being spent without any return on the investment. Some things can't be changed, such as taxes and insurance. Some things shouldn't be changed, like firing employees to save on salary costs when you really need them there to do the work. Don't shoot yourself in the foot, but don't let money flow without knowing where it's going, why it's going there, and what it's accomplishing.
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Target your ideal clients. Who are your best customers? Do you get many repeat sales? Referrals? What demographic tends to spend the most or spend the most often? Figure out what group(s) your best potential new customers are part of.
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Brainstorm cheap marketing ideas. Don't try to think outside the box; think, "What box?" Do some research. Read some creative marketing blogs. Get some trade magazines. Call other business owners and find out what's worked for them. What kind of marketing works for your business, your product, your service? What kind of marketing will reach your ideal clients?
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Implement some of your marketing ideas on your target client group. Pick five out of your top twenty and get to work. Be sure you can track a return on these marketing plans so you'll know which ones to drop and which ones to continue.
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Pay your bills on time. Reduce interest wherever possible. Keep an eye on your expenses and check out anything new or more costly than usual. Be aware, at all times, of the money going out.
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Increase your offerings. Find related products and services that you can incorporate into your business. Accessorize your main offering. Offer products at a lower price-point so new clients can try out what your business offers before making a huge financial commitment. Offer free samples, reviews, or introductory deals for uncertain customers.
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Offer memberships, prepaid accounts, and packages. Find ways to reward your clients for referrals, repeat business, and higher price-point purchases. Give them a reason to come back to you instead of the other guy.
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Never stop marketing and never stop reviewing your financial statements. Being aware of your financial situation is as important as working to improve it. As your business grows, allocate funds for marketing, public relations, and forming a brand identity. Review your marketing strategies and methods often. Try new things often. Keep your business face fresh so customers don't get bored, but offer the same high quality of service and/or product so they're never disappointed.
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Tips & Warnings
It takes time to build up new business, gain new clients, and see the effect on the numbers sheet. Don't be discouraged by a seeming lack of change over a week or a month. Hang in there and keep trying.
This is in no way a substitute for professional legal and tax advice. If you are uncertain about tax and/or legal issues in your business, get advice from an appropriate professional.
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Comments
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doing my principle of accounts sba and these are some good points.
