For many small business owners, making sure their business makes money is one of the biggest concerns and challenges.
Being in business and not feeling like you’re making money is one of the most stressful things in the world. Not only do you need your business to make money, you need it to make a profit after you have paid your operating expenses.
As you continue planning for 2021 or a new phase for your business there are a few things you could do to make your business more profitable.
Generally, making your business more profitable includes looking at ways to increase revenue from sales. This also includes lowering your costs and assessing your business to see where you can save money.
Reduce your overhead expenses and economize at each level
Overhead expenses (indirect expenses) have a habit of going up over time for many businesses. A quick and reliable way of raising your net profit is to periodically monitor your overhead expenses.
Overhead costs in your business are the expenses you cannot directly tie to a product or any specific business activity but they are actually important for your day to day business operations. For example, rent, utilities, employee benefits, indirect materials, indirect labor, insurance, repairs and maintenance, etc.
Benchmarking other businesses in your sector with similar businesses can help you figure out where you can improve.
Know that most of your competitors are able to outspend you when it comes to overhead expenses. But, you will only be able to stick in competition with them only if you maintain and control your indirect expenses responsibility. This is very crucial especially if you are still in your start-up phase.
Make sure you stay lean by economizing at every level of your business operations. Besides, it’s so much easier for a small business to come up with simple and smart ways to save money.
Maximize your cash flow
Cash flow is king of any business and without cash flow, your business is as well dead, it’s just a matter of time.
So you probably have some cash flow and that’s why you are still in business. But, if you want your business to be more profitable, you need to maximize your cash flow.
Find ways to ensure that cash is flowing in your business. For example, control your inventory, Collect your receivables and cut ties with unprofitable customers or relationships
Stay visible to your customers
Sometimes, how visible your business is to it’s prospective customers and how connect ed you are to your customers influences how much money you make.
Think of what can make customers set you apart from your competitors. Consider factors such as accreditations, certificationd and permits.
For example, a Halal accreditation can make customers choose your restaurant over your competitor.
For your existing customers, you need to find ways to make them come back to you. And, staying connected with them will make the work easier for you.
Stay in touch with customers and make strategic alliances, take your reputation online, using social media, your website, and a blog.
To bring new customers to your platform, use advertising sharing with affiliate companies. Find ways to leverage referral sales, and take advantage of affiliate marketing tools.
Importantly, eliminate stale, failed relationships that can pull you down.
Go where you are needed- where the demand is
It’s hard to make your business more profitable if you are in a market that does not need your business.
When there is a demand for your business in the market, this demand makes money for your business.
If you are an aspiring entrepreneur, ask yourself some questions before you start a business from scratch. “How is this business going to make money for me and hoe much money is it going to make?” Make sure you can answer these questions.
Do market research first:
Entrepreneurship gurus say that the market comes first and your thoughts or desires must come second (or even third).
If there are not enough individuals willing and able to purchase your goods or services in your service area, you simply can’t start a successful business.
Reduce stock/ inventory – stock control
A smart way to streamline the company and boost cash flow is to manage stocks.
Slow-moving inventory/stock brings less profits. And if you are having a lot of stock but it’s moving slowly, you are experiencing losses.
Today, most businesses operate on order basis. For example, you only acquire a product from your supplier once it’s ordered.
More often, ordering helps you to compare rates and take advantage of seasonal clearance or discounts on overstock.
Increase product prices
Look for ways you can command a higher price if you charge per product. Will more value be bungled into a package?
Will improving the marketing and sales copy/ message command selling at a higher price effectively?
Many business owners set their prices very low because they were hungry for business and wanted to make money. Well, they make sales but they don’t make profits with such a model.
Let’s say you put up your current prices by 2.5%. It will generate more profit (per sale). Today, if you sell exactly the same amount of items as before, you have improved both your turnover and your earnings.
Get new customers through your current customers
New customers can help your company grow. This can sometimes, however, be the most costly strategy for generating extra revenue. It costs eight times the amount of money on average to recruit a new client as it does to maintain a current client.
The best (and most cost-effective) way to get new clients is to provide your current clients with rewards and inspire them to initiate referrals for you. The most potent form of advertisement is word of mouth.
Focus on your profitable products or services
Every business that provides a variety of products or services definitely have their best selling one. E.g. a restaurant with 5 dishes in the menu has at least 3 that are best selling dishes for them.
For your business, the products or services that make the highest profit are the most significant.
You should focus on these once you have established the most valuable products or services.
Additionally, asses the less profitable ones and decide whether you need to eliminate them or check for areas of improvement.
Making your business more profitable is basically making more sales in your business.
Look for ways to sell more and make more. This will be accompanied by reducing your expenses and saving money at every level of your business operation.