Maintaining a small business has many parts to it and one of the most important is making a profit. Lets look at ways where we can increase sales revenue as well as decreasing your costs (if you have an office or overhead) and benchmarking your business to see where you can save money.
Here are seven effective strategies to improve profits:
1. Reevaluating Products and Services Based on Performance
Depending on your business it is important to measure the products or services with the highest gross profit margins as they will bring in the most. Once you have identified your most profitable products or services you should concentrate on those. You will need to determine if the unprofitable products or services should be removed completely or reviewed for areas of improvement.
2. Sourcing New Clients or Customers
I am sure you would love to have a vast amount of new calls or clients flooding in weekly which would in turn help your business grow. To make this happen sometimes can be an expensive strategy with marketing costs. On average it costs eight times the amount of money to acquire a new customer as it does to retain a current customer.
What you could do is to offer incentives to your current customers and motivate them to initiate referrals for you which would be the simplest (and most cost effective) way to get new customers. Word of mouth is also a powerful form of advertising.
3. Boosting Your Conversion Rate
As you know generating new leads is an important part of business growth. But do you know what percentage of these leads eventually convert to a sale? In order to increase the rate we need to have good copy (sales message), offers, calls to actions and understanding what your customer want to increasing sales conversion.
4. Revising Your Current Pricing Structure
When selling your product or service you must keep an eye on your pricing, market rate etc. yearly. You should always look at raising your price even though it can be a terrifying prospect. However, a small increase in your prices can make a significant impact on your gross profit.
Therefore, correct costing of your products and services is very important. You should review the costing of your products regularly and adjust your prices accordingly.
5. Inventory management
Stock control is a good way to streamline your business and improve cash flow.
With less money tied up in slow-moving inventory and fewer losses due to expired or discontinued inventory. Ordering more frequently allows you to compare prices and take advantage of seasonal clearance or overstock discounts.
6. Reducing Your Overall Direct Costs
Reducing your overall direct costs will have a significant impact on your gross margin.
One way to reduce your direct costs is to negotiate better prices or discounts for everything you buy. Provided the quality is comparable finding the best prices may require finding a new supplier.
Another way to reduce your direct costs is to eliminate unnecessary purchases. A thorough review of your direct costs should highlight any areas where overspending has occurred.
7. Reducing Your Overhead
For many businesses overhead expenses have a way of creeping up over time. Regular review of your overhead expenses is a simple and effective way of improving your net profit. Benchmarking your business to similar businesses in your industry may highlight areas for improvement.