Seven Tips to Maximize Profit in Business
Maximizing profit is what every business owner is looking for. Yet, most businesses fail to survive beyond five years, according to data from the Bureau of Labor Statistics.
Whether a start-up or an established venture, these business management tips can help your business to bring in profit.
1. Revenue increase: An in-depth analysis of where your money is coming from is the first step. Better marketing strategies, better product or service to offer or diversifying into more products or services are some strategies to increase revenue. Identifying what your customers want, and up-selling enhanced products or services to existing customers is another important aspect of increasing revenue.
2. Decrease costs: Money saved is money earned. Cutting down on unnecessary costs will also help in optimizing revenue. Some strategies help in decreasing fixed or variable costs:
a) Outsource: It is not possible for a business, especially start-ups, to have all the talent needed to manage various functions. Human resource is one area of considerable cost. By outsourcing certain non-revenue generating functions, including web designing or maintenance, design projects or payroll management, you can save a lot on costs. With the flexibility of today’s technology a huge array of solutions in this area can save serious amounts of time and money. For example, at Patin & Associates we offer exceptional, comprehensive financial and accounting solutions, reducing or eliminating the need for costly in-house accounting staff-- not to mention avoiding the eye-watering salary cost of retaining the benefits of financial consulting, financial management and other insights provided by a Chief Financial Officer (CFO) level employee.
b) Step up the pricing of the product or service: One of the key reasons for stunted growth could be that the pricing of the product or the service is not as per prevailing market trends. If outdated pricing is pulling your business down, consider increasing the price of the product or the service.
c) Check the direct and indirect costs: A little homework and analysis will help you understand where the money is going both in terms of direct and indirect costs. If you shop around, you might find better deals or vendors. Exploring a less expensive way of marketing may be the answer as well. If there are a huge number of errors that take away a chunk of your profits, investing in training the staff or implementing latest technology or software can help.
d) Look at overheads: Small things sometimes eat into the profit margin. For example, energy, fuel, travel, paper or other overheads. Minimizing travel by use of virtual conferencing or going completely paperless are some ways to minimize overheads. Better energy deals may be available in your location if you want to save up on energy costs. Switching over to solar power or cutting down on fuel expenses are ways to cut down on overheads.
3. Explore new customers: The constant building of a customer base is key to sustained growth and profitability. With newer products and services hitting the market every second, ensuring customer’s loyalty to the brand or service is a challenge. Efforts to constantly update the customer base and look for new customers are essential to growth.
4. Explore new markets: If you have a slump in growth, perhaps it is time to look at new markets hitherto unexplored. Market research can help you develop a strategy to expand into new markets geographically as well as demographically.
5. Step up productivity: Rewards and recognition always help to boost morale and productivity of the staff. Training the staff on necessary skills, whether it is a better sales strategy or in communication, will help in a big way to step up the overall productivity.
6. Debt management: Appropriate maintenance of debtor records and collecting debts on time will ensure you get your money back. Setting credit limits and payment terms will help ensure better cash flow.
7. Stay in touch with your customer: Feedback remains the best way to analyze where you are going wrong and what points could be improved. Collect regular feedback and improvise on the methods of communication; there are more approaches than ever before, selecting the right ones for your location and demographic can make all the difference.