03.14.17 | Big Ideas To Boost Your Profits
Profits get a bad rap in the press for being a symbol of greed. But profits are nothing of the sort. As Elon Musk puts it, they’re simply a way of keeping score, telling you whether you’re doing something that’s worthwhile or not. Increasing profits in the name of the game in business and there are all sorts of ways to do it. Here are some big ideas to boost your profitability.
Utilize Resources to Their Maximum Extent
Small businesses don’t usually have a lot of money to throw around. In fact, most small businesses are cash-starved, meaning that their profitability often requires their long-term bets paying off. In light of this, it’s imperative that small businesses focus on utilizing resources to their maximum extent. But what does that mean in practice?
For starters, it means knowing exactly what ROI you’ll get for a particular investment. Melinda Emerson, a management guru, says that she never employs anybody unless she knows their potential ROI. It’s imperative, she says, that each person hired at a small business is able to add overall value
She also points out that it is important to buy durable equipment, like anti-fatigue matting, to reduce depreciation. Every time companies spend money on new equipment, they’re eating into their profits.
Have Monthly Sales Goals
Having monthly sales goals is a great way to keep track of whether or not your business is on track. Emerson says that having a monthly sales log is a process you’ll want to start early on in your business. It’s rare, she says, to be a profitable business without having sales targets in mind, as these are what drive people in your organization to succeed and win as much business as possible.
Be On the Lookout For Efficiency Gains
Businesses aren’t government departments. They don’t have the luxury of staying in operation, no matter how high their expenses rise, thanks to getting paid by taxpayers. Instead, they have to manage their revenues against their costs and make sure that the latter do not exceed the former. When it comes to profits, businesses have two options: they can either increase revenues or reduce costs. Increasing revenues often includes a lot of risks – like a marketing campaign which could go wrong- but reducing costs is usually a safer option. There are usually dozens of ways that you can save costs around your business. Could you lower your banking fees by switching to a different provider? Could you save money on SaaS products you don’t use often? Could you lower your IT expenses by outsourcing to a third party company? Could you save money by swapping out light bulbs for something that uses less electricity?
Evaluate Your Pricing Strategy
There’s a reason businesses segment the market: they know that different groups of people will be willing to pay different amounts for the same service. Thus, it’s important that companies seek out these profit opportunities wherever possible. For instance, if you’re a software company, you could offer a slightly pared-down version of your product to students in exchange for a lower price in order to access that particular market.
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