How to Improve Business Profitability

In today’s fast-paced world, it is more important than ever to be able to sustain profits whilst you grow your business. You might think it is ‘common sense’ that as a business grows the profits increase right? Unfortunately, this is often not the case. For a business to scale operations it generally requires additional investment in working capital and this means expenses can rise disproportionately to sales increases. For example, you might get more staff, but the sales only increase to service half of their time, meaning the fixed cost can then outweigh the margin made on additional sales.

To be able to grow and remain profitable you need to be able to understand and leverage the best strategies:

Offer higher-quality products or services

If you have a product that is of higher quality than your competition, then you will likely see a much higher rate of repeat business. The acquisition cost is much lower when you retain repeat business than constantly finding new customers, therefore you should see your cost per customer reduce as you increase the number of customers who continuously purchase from you.

Constant repeat business does not work for every industry as it depends on what you sell, for example, customers will not purchase a mobile phone every week, however, the quality will still be relevant as when you launch new products you expect higher demand, so it is important to keep quality in mind and ensure the value of your product matches demand so you can maximise profits.

increase quality

Having a cost-effective mode of production

Having efficient operations will increase your profits, therefore you should constantly review how efficiently you service your customers and find ways to improve, so it becomes more cost-effective.

For example, if you make handmade bespoke products then this can be quite labour intensive. There will be a limit to how much one person can produce in a day which will ultimately limit the capacity of sales you can service. If you invest in machinery to automate your processes then this will speed up the operational performance, reduce labour time and allow you to start scaling operations. The impact of this will improve profit, as you will either be able to reduce staff (as fewer people will be required to produce more sales) or you replace their duties so they can focus on other value-adding activities such as quality control.

It is important to calculate ROI on any investment to ensure it is viable. This is not always as straightforward as it seems as let’s say the new machine costs £100k if you make redundancies, then that calculation is simpler as the cost per unit for labour will reduce but if you do not make staff redundant and implement a quality control department, then you would expect better quality, hence less returns and the calculations start to become more complex.

It is important to ensure all costs are captured to have an accurate measure, otherwise, you can make the wrong decision by not assessing profit-generating ideas which are not as easy to calculate in cash terms. For example, making redundancies is likely to give you a direct cash saving now but implementing quality control might take 3 months, not give a benefit of cash immediately but ultimately make you more profitable in the long run as you have fewer returns, better customer experience and more repeat business, lowering your overall cost of acquisition for the long term!

Having a well-targeted marketing campaign

Having a well-focused marketing strategy will increase your business profitability. By focusing on the right marketing methods and resources, you can reach more people with your brand, which in turn, will increase your sales and profitability. 

It is important to find out what works best for you and your target audience. You should keep track of your marketing campaigns, how much they cost you and the return you make. Some ideas will work, some will not but if you keep track you will be able to change methods quickly and adapt to new ways of working, so you embed a cost-effective marketing strategy that makes the most return.

targeted campaign

Reduce overheads

This is often quite a simple way to reduce profit quickly but one that many businesses do not implement effectively. It can be difficult to have a process that provides you with the ‘right’ information quickly to make cost-cutting decisions, which can lead to business owners making rash decisions which they think are quick ‘wins’, such as cutting marketing spend or making redundancies. These will have short term benefits in cash but often have a longer-term consequence that hinders growth.

The good news is generally there are always opportunities to reduce costs. It is best to set up schedules with all costs listed out at itemized level, especially little and often expenses such as software and direct debits. You want to cascade ownership of spend to your employees or have someone dedicate their time so they can review the spending and find alternative options that still provide you with what you need but at a lower cost. For example, when your business insurance comes for renewal then someone should take ownership to research different providers to ultimately find a better deal.

Sometimes you may even be paying for something that is no longer needed, or opportunities arise to get a business or ‘group’ deal so you can lower the cost per usage or license.

Remember the purpose of reducing overheads is to have this as a business strategy, not a short-term cost-cutting exercise. If you plan ahead the need to make quick decisions will reduce and you will have more time to make informed decisions.

Improve your customer service

Good customer service is important. Customers often tell you about the bad experiences they had with other businesses. This can be in the form of phone calls, emails, or complaints on review sites such as Yelp and Google reviews. You need to respond quickly to these comments and resolve any issues.

You can reduce customer service costs by implementing regular touchpoints with your customers, for example implementing automated messages keeping them updated within their journey. This will reduce the number of enquiries allowing your team to become more efficient, service more customers and reduce costs.

customer service

Increase your brand awareness

If you want to increase brand awareness, then you should consider using multiple channels to reach a broader audience. It is important for your customers to continuously hear or see you, so when they are ready to buy they recognize your brand or logo.

You can also increase your brand awareness by creating a unique selling proposition (USP). There are a lot of competitors in the market and you might be wondering how you can stand out from the crowd. Well, one way is to create a unique selling proposition. The USP is a clear explanation of what makes your business unique. In other words, your USP will tell people why your company’s product or service is better than the competition. 

But why does this help profits?

The aim of all business is to convert customers as cost-effectively as possible, so having a brand customers are aware of can support reduced marketing costs, increase conversion costs and lower cost per acquisition. If you have to plug lots of money into constant paid ads with little return then you might need to stop the marketing and review your brand and strategy so you increase conversions


There are many ways a business can improve its profitability and as you can see from our blog these are not always specifically related to tangible cost-cutting solutions but more importantly streamlining your overall business model from marketing, brand awareness to automation in the operational cycle.

Every decision a business owner makes will have some form of financial consequence, whether that will be in time, cash or profit, so it is important to take time each week, month and quarter to review your business finances, in line with your operations so you can identify opportunities to grow efficiently so profit is not impacted

It can be time-consuming to implement the right KPI’s, build the reporting required to analyse your business whilst reviewing how to continuously meet your targets but it is imperative so you can make the right decisions

Wilkinson Accounting Solutions specialize in helping ambitious directors receive the right information so they can grow with confidence, credibility and calculated risk.

Contact us today to find out how we can help you implement the right analysis to grow your business.

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