Increasing your profits might sound like it’s an unattainable dream just out of your reach. There are a finite number of ways to increase your profits. Once you understand what they are, you’ll have clarity on how to best reach your profit goals. You can then implement them one at a time to increase your profit margin. Here are eight ways to increase your profits.
There are two primary ways to increase your profits:
- Raise your revenue
- Lower your expenses
That’s not particularly enlightening or instructional, is it? Let’s look at the four ways you can increase revenues and the four ways you can reduce expenses to get clearer on what actions you can take.
Four Ways to Increase Revenue
1. Raise prices
The easiest way to raise revenue is to simply raise prices. However, this is not foolproof and assumes you’ll be able to maintain the volume of sales you’ve achieved in the past. This method is also limited by market demand, what your customers are willing to pay. What if you lose a few customers due to the price increase? Chances are since you are charging a slightly higher price across the board the fallout won’t break the bank. Start gradually and listen to your customers.
2. Add new customers
Adding new customers is what most entrepreneurs think about when raising revenue. Increasing your marketing or adding new marketing methods is typically the way to add new customers.
Another related option is to work hard to keep the customers you already have. You can also potentially contact the customers you lost and ask them to come back.
Ask for referrals! If a customer loved working with you they will be thrilled to have others work with you too. It never hurts to ask.
3. Introduce new products or services
For some companies, your products and services are changing every year. For others, not so much. To increase revenue, consider adding new products or services that will bring in an additional revenue stream that you didn’t have before.
Even if your products are changing every year, you can consider adding something completely different that your customer base would love. For example, a hair salon could add a nail desk, a clothing store could add handbags or shoes, a grocery store could add a coffee bar, a restaurant could add catering, and so on.
4. Acquisition
The final way a business can increase revenue is to acquire another business in a merger or acquisition.
Four Ways to Reduce Expenses
1. Negotiate for a better deal with vendors
If you’ve been working with a vendor for a while, you may be able to re-negotiate your contract with them. This is especially common with telecom companies. Call you phone provider and ask them for the latest deal. They always favor new customers over long term customers, but they don’t want to lose customers either. Just calling them usually yields a better price than what you are paying now.
2. Change vendors
If a vendor has gotten too expensive, it might be time to look for a new vendor. Health care insurance seems to be in this category. Often, changing providers will lower your costs.
If you haven’t price shopped a vendor in a while see what you can get online. Are you getting the best price? Will your current vendor price match?
3. Cut down the headcount
If there is not enough work to support your employees or not enough cash flow to pay them, then it might be time for a layoff or restructuring. Keep the best employees and implement a bonus program. Click here for more on leadership.
You might also consider outsourcing a function that you previously did in-house.
4. Cut the expense or reduce services
It might be your business no longer needs to spend money on an expense. Perhaps this expense has been automated. In this case, it’s an easy decision to cut the expense out entirely.
Review your statements. Auto billing is so easy to lose sight of. Do a sweep through your accounts and see what you can cut. Sometimes it is something you rarely use!
Staying up to date on your bookkeeping will help you quickly identify the easy areas to cut back. Need help? Visit us at www.DBusinessSolutions.com to learn more about our QuickBooks Online accounting services.
Those are the eight ways to increase your profits. Which one makes the most sense in your business? Create a plan around these eight ideas to boost your profit in 2017, and let us know if we can help.
