5 ways to increase profit in your business
Business owners need to find ways to increase their profits and grow their business. It can be difficult to find ways to increase profits when you’re starting, and it can be even harder when you’re running a well-established business but whether you have been trading for years or just starting, it is always useful to take a step back and review techniques that will continuously help you grow.
Increase your prices
Increasing profit in a business can often seem like a difficult feat to accomplish. However, with a little research and hard work you can find ways to increase your annual profit figures by raising your sales prices.
To increase your prices, you need to be aware of where you’re pricing currently sits within the market and that the service or product you deliver will still be viable, however, that being said it could be with a few tweaks to what you offer or a change in market demographics you could consistently increase your prices with doing very little to your overall strategy. This can often be a good strategy to implement as it can be little work for a high reward.
Increasing sales will likely lead to some form of revenue loss in short-term (as you may have customers on board that will not pay increased prices etc) but if you stick to your business model and find the right type of customer, then the sales increases will be targeted to a customer base who is willing to pay.
Increase the number of customers
Increasing the number of customers will increase volume and hence can increase profits. Keeping track of the overheads required to maintain a higher level of customers will be key as if a business is not careful, they can try to grow too quickly and the cost of that growth can have short term cash flow implications.
That being said as long as you have a profitable product and customer portfolio, then an increased customer demand will drive lower costs, as with economies of scale your costs can reduce as the demand rises.
Thinking about how you scale is only one part of the plan, the next part of the battle is getting more people to buy your products and service, therefore to increase the number of customers you get you to need to do some work on your marketing strategy, as with any business the market must be aware of your brand.
Increasing customers can be a great way to keep driving higher profits, but planning will be key to make sure the growth is in line with the cash flow you have available.
Increase how often your customers make purchases
It is generally cheaper to have repeat customers than to constantly find new ones. The acquisition cost to onboard new customers will be more than selling to customers who already know your brand.
By increasing the amount that your customers purchase from you, will not only increase your sales but also reduce the amount you are spending to convert that sale as if the repeat purchase has now come directly (you now have little or no cost to convert that particular sale)
This is why it is useful when planning your sales strategy to actually split out repeat vs new customers as this will have a large impact on how much you plan into your marketing budget and what strategy you adopt on pricing
Increase the amount that customers purchase
Enthusiastic customers are absolutely vital for any business. Thus, any business owner must keep a close eye on how to implement a strategy to encourage customer loyalty and increase the volumes they purchase. Effective strategies can be by offering things such as discounts, loyalty rewards or cashback etc to entice purchases, as it makes the customers feel they are gaining something from you apart from ‘buying’ the product.
There is obviously a cost to this as you are giving away items for ‘free’ but as long as this is priced into your cost and marketing strategy then it can be a great way to increase purchasing behaviour.
Increase the efficiency of product/service creation
Increasing the efficiency of your operations is key to continuously improving your profits. Looking at ‘how’ you sell things and ‘what’ the customer journey is like can help increase demand and become more competitive, whilst reducing your overall cost base.
Let’s take a consultancy business as an example. You may offer 1-2-1 consultancy to your clients whether that be HR, Wellness, finance etc but if your overall model is you selling your time for money then there will only be so many clients you can serve within a certain period of time unless you either recruit or change your strategy so your consultancy can now be developed into some form of online or pre-recorded course.
Changing a strategy like this will not come without its challenges as it is likely you will have to re-assess what type of customer will buy and what the pricing structure will look like. Generally, if something is pre-recorded each customer will pay less but the advantages are over time as the sales start to pour in, you now have some residual income with minimal effort and lower overhead cost (as you are not paying someone else for a day’s work)
Continuously reviewing end to end operations will help you assess ‘what’ you want to change and the cost involved. The key here is to make sure those are logged within the business and financial plan, as it will allow you to actually target when you need to implement the changes and what financial reward will be for the change. Short term you may see a loss or negative cash position, that is why longer-term forecasting is key so you don’t make decisions based on today, as short term investment will support long term growth.
The secret to increasing profits is making sure you have the right sales strategy, selling to the right customer, and having streamlined operations to reduce costs. 5 Ways to implement these strategies are:-
- Increase your prices
- Increase the number of customers
- Increase how often your customers make purchases
- Increase the amount that customers purchase
- Increase the efficiency of product/service creation