Here are 13 most effective ways to increase profits in your small business:
- Reduce cost of sales
- Increase selling prices
- Go into other businesses
- Spend money to get money
- Pay special attention to existing customers
- Set gross profit margins
- Focus on sales
- Improve your online reputation
- Outsource jobs
- Do follow-ups
- 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 small business successfully, you must be able to experiment with different marketing strategies.
In other words, you will need to implement the marketing strategies that work and drop those that do not.
Furthermore, you will need to continually review and make changes here and there in all areas of your business practices.
To help you, the following are tips that you can use to increase profits in your business.
Reduce cost of sales
To increase profits in your small business, you need to reduce the cost prices of the goods you sell.
Simply put, cost of sales is defined as Selling Price minus Cost price of the product sold.
By illustration, SP-CP = cost of goods sold.
It is the cost prices of the products that you need to reduce in order to increase profits.
However, before you can reduce the cost prices of the products, you will need to negotiate favorable prices with your suppliers.
Your suppliers could be manufacturers, importers or wholesalers.
Moreover, your ability to negotiate with your suppliers will be very important and critical to your success.
If you are able to get supplies at favorable prices, then you should be able to sell to your customers at competitive prices.
Most importantly, note that if the cost prices of your products are high, your profits will reduce.
On the other hand, if the costs of your products are low, your profits will increase.
Increase selling prices
You can also increase profits by raising the selling prices of your products. But a word of caution here.
You may not be the only manufacturer or producer of the products you are selling.
That means that you will have competitors to contend with in the marketplace.
One way to get around this problem is for you to have a niche product or brand that is not commonly found in the market.
Where this is not possible, you can increase profits by selling very high quality products.
In other words, you can become well-known for quality products.
Customers that have high tastes for quality products will be willing to pay premium prices.
Most importantly, you will need to backup the high prices with excellent customer service.
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.
This will be possible because you will be more or less a pioneer in the market.
Although running a business can be challenging at times, it’s possible to increase your business profits with just a few changes in your practices. Business owners who learn to experiment with different strategies to boost revenues become more profitable. We spoke with the experts who shared their tips on how to increase profits.
Here are the top 17 strategies to help business owners increase their 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 give 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 at the end of the transaction.
Pay Special 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.
It has been suggested that it is always easier and cheaper to sell to an existing customer than to win a new customer.
Set Gross Profit Margin Percentage
The gross margins percentage targets will enable you to drive sales and increase profits.
You should set gross profit margin each of your products.
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 buying process is not what the customers expect.
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 shopped for prices elsewhere before coming to you.
Doing so will enable you not only to sell more but to retain the customer.
Most importantly, setting gross profit margins will enable you to identify your most profitable products and pay more attention to them.
Focus On Sales
One of the easiest ways to increase profits is focusing on sales from the start. You cannot talk of profits without talking of sales.
Furthermore, you can increase profits by:
- Attracting five-star reviews,
- Using case studies,
- Getting your brand mentioned by bloggers and news media
Asking customers for reviews is an excellent and inexpensive way to boost sales and increase profits.
In fact a five-star review of your product will enable you to sell more of that product.
Much of the buying process are now done online. Many of your customers will research your products before making a purchase.
In addition to online transactions, you should use all legit means to drive sales and increase profits in your shop.
Improve Your Online Reputation
You will need to build a website to show case your products or services. Consumers are moved by what they see.
Irrespective of the size of your business, your online reputation matters a lot because:
- It adds credibility to your business
- It tells consumers and other businesses that you care about them
- Furthermore, you need to add call-to-actions on your website and let the visitors contact you easily through web forms, landing pages, etc.
This will enable you to be active on social media platforms just as it will enable you to interact with the visitors regularly.
Adding a blog to your website and networking with other businesses will enhance the visibility of your business.
Therefore, owning a website could actually help you to increase sales and increase profits. The results could be slow but it will sure be visible in the long run.
Another way you can reduce costs and increase profits is to outsource jobs to outsider contractors.
The jobs could be:
- It will not be economical for you to do in-house
- Jobs that you do not have the personnel to perform
- Jobs that you do not have the equipment to carry out in-house
In some cases, it will be more cost effective for you to outsource jobs than engage full-time permanent employees.
Furthermore, it is easier to let go a contractor than to fire an employee. This is because they are paid on the basis of jobs done by them.
Do Follow Up
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, email, text messages and so on. Any of the above options can work with most businesses.
Besides, social media is always handy for follow-up surveys and reviews. The key, as always, is for you to know your audience and accurately assess the situation.
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 should 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.
Adopt A Continuous Improvement Policy
To enable you improve sales and increase profits, you need to adopt a continuous improvement policy for your business.
This means drawing up the process for how things are made now (current state) and finding ways to reduce the steps in the process.
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.
In other words, figure out how you want things done in the future.
You should continually seek for better, cheaper ways of improving customer satisfaction.
Do not just be satisfied with the current state of getting things done in your business.
In all of these, your aim should be to increase sales and increase profits.
Failing to make or increase profits is something you should not like to experience.
However, some businesses need to adopt new practices and find ways to become more 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.