Below are 18 Tips on how to increase profits for a small business:
- Buy merchandise from cheap sources
- Review your pricing strategies
- Develop or modify an old product
- Sell high quality products
- Go into other businesses
- Spend money to get money
- Pay attention to existing customers
- Set gross profit margins
- Reduce inventory
- Focus on sales
- Review business processes
- Improve your online reputation
- Reduce business expenses
- Outsource jobs
- Get feedback from customers
- Know what your customers need
- Adopt a continuous improvement policy
- Bottom line
It is the dream of every entrepreneur to increase profits in his business.
However, you cannot just wake up one day and increase your profits.
To increase profits in your business takes gradual process.
And you must be able to experiment with different marketing strategies.
Going forward, the following tips can help you to optimize your profits.
1. Buy merchandise from cheap sources.
To increase profits in your business, you will need to buy products from cheap sources.
This is because if you buy from cheap sources you will able to sell at competitive prices.
Furthermore, must be able to negotiate favorable terms with suppliers.
Therefore, you can talk to some manufacturers, importers and large distributors.
2. Review your pricing strategies
In order to increase profits, you need to review your pricing strategies from time to time.
This will ensure that you are not selling at prices that are not sustainable.
t is possible that you are still using prices that you set long ago and which are no longer sustainable.
If you set prices too high, you can scare your customers away.
On the other hand, if you set prices too low, you risk operating your business at a loss.
You should remember that the concept of product pricing is only an estimate of what customers will be willing and able to pay.
Going forward, it means that you need to set your prices at levels neither too high nor too low.
In other words, you need to stay at the middle of high and low.
In addition, you can even increase your profits by selling your products to customers in different markets at different prices.
Therefore, to increase profits you must closely monitor the ruling prices in the market so that you can cope with competition.
3. Increase profits: Develop or modify an old product
You can increase profits by developing or modifying an existing product.
Developing a new or modified product will give you the opportunity to:
- dictate the price of the product
- track the marketing of the product
- make quick profits before before competitors move in with the same or similar product.
Additionally, you will be able to make quick profits before competitors begin to move in share harvest of profits.
4. Sell high quality products
You can increase your business profits by selling high quality products.
By selling high quality products, customers who have high taste will be willing to pay a little more to get value for their money.
However, to succeed with this strategy requires that you:
- ensure that the product you are selling is not the type customers can easily find around.
- advertise the product on regular basis
- back it up by customer satisfaction
5. Go into other businesses
You can increase profits by going into other businesses that have low competition.
If you are the first to get there, you can make quick money before other people enter the market.
However, you need to be smart and monitor the market. At appropriate time you should be able to know when to make changes here and there in your business processes.
6. Increase profits: Spend Money to Make Money
You can use a loan to grow your business. This may sound somehow strange to some people.
For example, a short term loan used to fund a sudden business opportunity can enable you to increase profits in your business.
If your goal is to increase profits, you should ensure that there will be something left for you after repaying the loan.
7. Pay Attention To Existing Customers
One of the best ways to increase profits in your business is to:
- Increase efficiency by taking care of your existing customers.
- Offer a wide range of products from which customers can choose from.
- Make the buying process as simple as possible for your customers.
Researchers have suggested that it is always easier and cheaper to sell to an existing customer than to win a new customer.
8. Increase profits: Set Gross Profit Margin Percentage
The gross margins percentage targets can enable you to drive sales and increase profits.
This will help you to monitor the performance of each product so you can make changes when necessary.
This will enable you to identify your most profitable products so you can pay more attention to them.
You should not stop there. Find out why other products have not been profitable.
You never can tell; it could be that you are not offering what your customers need. Or that doing business with you is not easy.
Furthermore, there might times when you will need to adjust the gross profit margins.
For example, you could be hard pressed by an important customer to reduce prices for him.
It could even happen that the customer has verified prices elsewhere before coming to your shop.
Furthermore, being a bit flexible will enable you not only to sell more but also to retain the customer.
Reducing your inventory can save you some money.
For example, if you are carry excessive stocks and customers are not coming in, you will lose money on:
- cost of capital
Furthermore, you can consider selling off or writing off old inventory.
Why pay to store stuff you really do not have use for?
Free up the space and cash tied up in old inventory.
More importantly, you should set optimal inventory levels and stick to them.
Most importantly, constantly be on the lookout for ways to safely reduce your inventory levels.
10. Increase profits: Focus On Sales
One of the easiest ways to increase profits is to focus on sales from the start. You cannot talk of profits without talking of sales.
You need to focus your best efforts on:
- your talents,
- selling your most profitable products
- using effective marketing channels such as
- Radio and television
- social media and so on.
Furthermore, you can increase sales and profits by asking customers for review of your products.
For example, if your product attracts a five star review, that product will nearly almost sell itself!
This is because five star review is an endorsement that the product is something people will want to put their money.
11. Review your business processes
To increase sales and hence profits, you need to make it possible for customers to do business with you in seamless manner.
In other words, you need to ensure that you regularly review the ease of doing business with you.
For example, you need to review the way you manage your
Furthermore, customers want to see continual improvements in your business processes.
Remember that customers are the kings and queens. And so you need them more they need you.
Also remember that without customers, your business will be worthless.
And your wallet will be empty.
12. Increase profits: Improve Your Online Reputation
You will need to build a website to showcase your products or services. Consumers are moved by what they see.
Adding a blog to your website and networking with other businesses will enhance the visibility of your business.
Irrespective of the size of your business, your online reputation matters a lot because it:
- adds credibility to your business
- tells consumers and other businesses that you care about them
- adds call-to-actions on your website
- lets visitors contact you easily through web forms, landing pages, email,
Additionally, it will enable you to interact with the visitors regularly.
Therefore, owning a website can actually enable you to increase profits in your business.
Most importantly, the results could be slow but it will surely be visible in the long run.
13. Reduce business expenses
You need to reduce your business expenses to increase profits in your business.
For example, you can re-negotiate with your landlord to see if he will allow you to sublet part of your warehouse to another trader. If he agrees this will reduce the amount you will have to pay as rent.
In other words, you and the person you sublet the shop/store/warehouse to will share the rent. That will be cool for you.
Beyond that, you can go through your profit and loss account to identify business expenses that can be:
- eliminated altogether
14. Increase Profits: Outsource Jobs
Another way you can reduce costs and increase profits in your business is to outsource jobs to outsider contractors.
This will be helpful especially, if you cannot do the jobs in-house. Or it will not be economical for you to carry out the task in-house because you do not have the personnel or equipment.
Furthermore, in some cases it might make more economic sense to outsource than to employ full-time permanent employees.
Most importantly, it is easier to let go a contractor than to fire an employee. This is because contractors will be paid on the basis of the jobs they do for you.
15. Get Feedback from customers
Yet another strategy you can use to retain your customers, make more sales and increase profits is for you to do follow-ups.
There are many methods you can use to do follow up;
- telephone calls,
- text messages
- personal visits to customers
Any of the above options can work with most businesses.
Furthermore, social media is always handy for follow-up surveys and reviews.
Most importantly, the key, as always, is for you to know your audience and accurately assess their needs, tastes and preferences.
16. Increase profits: Know What Your Customers Need
You need to understand what your customers need and provide them.
This way, you will be able to drive sales and increase profits.
Moreover, you really need to understand why they chose to come to you in the first place. Or why they are not coming to your shop.
Furthermore, you can find out how your ease of doing business is different from others.
Therefore, once you are able to adjust your business practices to meet the needs of your customers, you will be better positioned to increase profits.
17. Increase Profits: Continuous Improvement Policy
To enable you improve sales and increase profits, you need to adopt a continuous improvement policy for your business.
This means that you have to review how things are done now and how you want them done in the future
You should understand that fewer steps mean lower costs, and lower costs often result in higher profits.
Furthermore, you should create your idea road map for your business processes.
You should continually seek for better, cheaper ways of improving customer experience and satisfaction.
Do not just be satisfied with the current state of getting things done in your business.
In all of these, your aim should always be to increase sales and reduce expenses.
18. Bottom Line
Making sales and improving your profits is something you should not compromise.
However, some businesses do adopt new practices and find ways to become more efficient and profitable.
If your business is currently struggling to make profits, or you want to increase profits year in year out, then you should make use of the above tips.
By Samuel Ijenhi
B. Sc. Accounting [University of Benin]
Benin City, Nigeria
Founder: Ijenhi Business Solutions.