How to Increase Business Profits

Companies often spend a lot of their time analyzing sales numbers and simply assume that profits will naturally follow. Unfortunately, most businesses do not see the error of their ways until the end of the fiscal or calendar year, and then it's too late. Let's look at ways to change that with your company, all year round, to increase profitability. It simply takes some imagination and knowledge of how a business executive views his or her role.

Difficulty:

Challenging

Instructions

1. Check the effectiveness of your marketing campaign. Too often, a company will spend heavily to advertise its products or services but they do not take the time to determine if it works. Furthermore, if the company is doing institutional advertising while it advertises its products or services, that calls accountability even more into question. Separate the two, then track the effectiveness of your advertising by analyzing from where your sales have come. If you determine that a high percentage of your advertising dollars do not convert to sales, reformulate your plan as soon as you can.

2. Consider raising prices. Often, companies are hesitant to do so for fear that the competition will steal their share of the market. There are cases, however, that the perception of product or service superiority increases when a company decides to raise prices. If you have any doubts, test the concept by raising prices on a small selection of your products. Review the results in 45 to 60 days and chances are you will be pleasantly surprised.

3. Insist that your salespeople upsell at every opportunity. It takes only a little extra effort to add to a sale. If you find that most of your people are not making the effort to upsell, there are a few things you can do. First, impress them with the notion that it is part of their jobs. If, through analysis, you determine that upselling has not been emphasized, then try offering incentives for the balance of the year. Upselling should become a habit.

4. Determine if your company has outsourced as much as it should. The best way to determine this is to think about the one thing your company does that results in the most profit, then analyze everything else from the standpoint of having someone else do it. What would life be like if all of your accounting were done by a service bureau? What if you licensed other manufacturers to make items you are currently making? Companies that selectively outsource day-to-day activities tend to be the most profitable.

5. Watch your company's expenses. There is no better way to increase profitability than to stop unnecessary corporate spending. For example, the cost of business travel is going through the roof, yet many companies are slow in addressing this budget item. Assess the criteria your managers are using for determining the necessity for travel and the safeguards they have in place. Could it be that many of your employee's trips are unnecessary? Could a telephone call instead of a personal visit satisfy a customer's immediate needs?