When looking for ways of increasing profitability, there are only two real options: reducing your business costs or improving your turnover. Of course, that’s a lot easier said than done, but by being alert to opportunities to maximize your bottom line, you could be able to make a considerable difference. Here are our top tips for enhancing business profitability:
Stay On Top of Your Accounting
Small businesses often fall behind with their accounting and are unable to form a clear picture of how they’re shaping with regards to income and expenses. This is vital, time-sensitive information. If you need to be saving on costs or getting more income, you need to be able to act fast if you see signs of unfavorable results.
If your business is too small to hire an accountant or bookkeeper, consider using a free platform for invoicing and for tracking your expenses on an ongoing basis. You need to be able to draw reports and analytics on a regular basis in order to determine where you could be improving your profit margin.
By staying on top of your books, you’ll also be able to see if you need to source financing to give your business a boost before it becomes a make-or-break emergency.
Check Your Expenses and Costs
Know where your business stands and think carefully about every business cost with cost-saving strategies in mind.
- Are you spending on items that are ‘nice’ rather than necessary? Warren Buffet is known to have said, “If you’re buying things you don’t need, you’ll soon be selling things you do need”.
- Could you be getting your business inputs at a lower cost? Don’t stop at checking pricing. You may be able to get a favorable deal through negotiation.
- Would you be able to save on costs if you outsourced certain activities? The less staff and facilities you need to support, the lower your overheads will be. Consider outsourcing admin tasks or portions of your production process.
Check Your Profit Margin Per Product and Service
Many businesses have marginally profitable or even loss-making products and services in their mix. Unless you are consciously implementing a loss-leader strategy, you need to consider eliminating these profit-eaters. Does your business really need to offer the item in order to attract clients? Could you get away with increasing the pricing?
According to the 80/20 principle, we get 80% of our results out of 20% of our products. Which 20% of your product or service offering makes you most of your money? These are the products you need to focus the most energy on. If you decide to apply your resources to a product that are in your less profitable 80%, have a clear strategy for improving its performance and set goals for tracking your progress. If you are able to eliminate the lowest-performing products from your mix without adversely affecting your overall business, do so.
Get the Most Out of Your Staff
Your staff is costing you. Are they delivering at peak performance? Here are some ideas that could help you to boost productivity and get better results for the same costs.
- Set clear goals for each staff member. What do you want them to achieve? Set SMART objectives in consultation with your employees.
- Review progress regularly and give feedback. If your staff is not reaching their targets, are there acceptable reasons for their underperformance? Remember to congratulate employees on reaching or exceeding goals as well as addressing under-performers.
- Communicate regularly with your staff and ensure that they are aware of your overall business objectives and their role in achieving them. Set regular meeting times to help you make this part of your regular routine.
Do you really need as much office space as you currently have? If employees work from home, you can cut down on office space, office equipment and staff facilities. Most employees love the idea of telecommuting and see it as a benefit, so it’s also a great motivator. Just ensure that you have enough personal contact with your telecommuting employees to keep them focussed on your business goals.
Get the Most Out of Your Sales Effort
Are your sales reps really selling as much as they can? Ensure that they are focussed on results and don’t have any distractions that take them away from their primary task: selling.
- Not everyone is able to become a successful salesperson. Ensure that you are employing go-getters who will enhance your business image and get you the sales you need.
- Set reachable sales budgets for each rep. Don’t make it too easy. Reaching a budget should not be an effortless process. Provide them with a challenge, but don’t make it over the top.
- Use incentives such as commissions, prizes and bonuses to motivate your sales reps to try harder. You may find that different incentives work better for some employees than others. Get to know your staff and what motivates them.
- Ensure that your reps are using most of their time on your top clients or clients that have the potential to become important to your business. Supply them with customer analysis reports and ask them to report on their most vital clients regularly.
- Reduce their admin load. Do your reps really need to spend time on invoicing? Is your dispatch team able to prepare orders without intervention from the rep? Find ways to maximize selling time.
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Find Ways to Market Your Business Effectively
Marketing doesn’t have to be an expensive activity. Here are a few ideas that can help you to grow your sales without costing you a fortune.
- Although costly print advertising still has its place, you can achieve a lot through having a professional website, using social media and search engine advertising.
- If you operate within a specific community, get involved with community activities that can be used to create awareness and build relationships within the community.
- Join networking organizations where you will have contact with other businessmen and play an active role. When your co-members are looking for a certain type of business, your enterprise will be the first that springs to mind.
- Stay in touch with your clients by sending out an informative newsletter regularly. Don’t just use it to sell your products. Give them useful information that will get them reading rather than hitting ‘delete’.
If your business needs startup business loans in order to make a bigger profit, contact Seek Capital today. In 2017, we funded close to $100 million for startup businesses.
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