No matter what kind of business you have, one of the things that you want to do is to make sure that you have good profit. To round out our blogs about cash flow and profit, we are going to give you some tips on how to increase profit in your business.
Assess & Reduce Your Operating Costs to Increase Profit
These costs are the ones that are what you have to pay to run your business. These are things like equipment, inventory, advertising and marketing, rent, research and development, utilities, payroll, selling and other things.
This doesn’t include those costs that are associated directly with producing your products. These come in the COGS or capital expenditures for the large ticket items such as machinery or buildings.
When a company has to cut their costs, this is often the first place that the business owner looks, since the costs aren’t related directly to production. But, if it’s done unwisely or preemptively, these cuts might have negative effects on a business in the long term. It’s important to review all of the reductions so that the executive can understand the way that reducing marketing and advertising is going to impact their sales in the coming months. In the same way, slashing research and development and it’s possible that you’ll end up without any new products that you can release 12-24 months in the future.
Adjust the Prices to Help with Increasing Profit
COGS are those direct costs that are associated with delivering services or making products, mainly labor and raw materials. It’s essential that COGS get accurately calculated and that it’s kept consistently so that the services and products are correctly priced.
In order that this is achieved, a company has to make sure they’re defining, tracking and pricing for the material and time resources that are needed to complete the builds. When the manufacturing process is standardized, it’s possible to anticipate the true costs accurately and avoid big differences between builds, therefore standardizing the COGS.
Even though you can immediately decrease the COGS by substituting cheaper raw materials or components, or by decreasing the labor, you want to consider the implications in the long run. Is the product quality or production speed going to suffer?
Review Product Portfolio & Pricing to Increase Profit
Along with the two items that are above, you also want to understand the true margins for the units on your products that are in the business portfolio and frequently update the data.
Something to remember is that before you’re adding new offerings, make sure that you’re reviewing the current portfolio. Are the products underperforming? Are you having difficulty with producing items that are chipping away at your company’s money, time and margins? Would lowering the price of the products that have the highest margin increase your sales? Not only that, but you want to consider discontinuing the products which have very low margins or increase their prices.
Cross-Sell, Resell and Upsell to Help Your Profit
It’s really expensive to get new customers. That’s the reason why a lot of companies understand the way that they can increase their sale is to introduce their existing customers to other products by way of cross-selling, reselling and upselling.
Make sure that all of your sales reps get trained in techniques for upselling and understand the way for approaching the customer without turning a customer off and being pushy. Use an approach that is informative and educational and tell the customer how the premium features will give additional features which can benefit the customer. Clear comparisons, like using an informative graphic or grid, can be very helpful to help educate customers on the benefits and features of different models available.
Another easy way that you can increase your current customers’ product consumption is cross-selling. Think about having promotions so that you can introduce your customers to other products, particularly new ones. For example, think of the stores that offer a new free shampoo with their hairspray purchase. You can also cross-sell without offering a discount, simply by giving a recommendation.
Reselling is one of the ways that a lot of companies are creating more revenue from their existing products. When a resell program is offered, a customer can sell back or donate the merchandise they don’t want anymore but that still is in great condition. With some cleaning and minor refurbishing, the merchandise often can be resold, which will increase profits and decrease the waste of items that are unwanted.
Increase Your Lifetime Value of Customers to Increase Profit
You should never underestimate how powerful a happy client is. Understanding customers and consistently delivering excellent experience is one of the best ways that you can increase your loyalty, give your profits a boot, and get some new customers because they are referring others to your business. https://www.molloylandscape.com/request-a-quote/
It’s also a good idea to show existing customers how you appreciate them, increase the lifetime value of customers, give your profits a boost and deliver some new leads. How can you do that? Think about doing the following:
- Offering Incentives= Offer a personalized product promotion of something your customer’s shown interest in, and give them a code they can share with their family and friends.
- Encouraging Referrals – Launch a program that will reward your customers when they recommend your service or product
- Posting Recommendations & Reviews – Give customers incentives for talking up favorite services or products on their social media accounts.
Use Automation to Help with Increasing Profit
One of the best ways that you can increase your profitability in your business is to lower your operating costs. A great way to do this is through using automation. Although this may not seem like a great way to lower costs at first, think about this. When you automate things such as emails and invoicing, the emails can be sent automatically meaning that your employees can spend less time doing other things. You also can write an email once and have it sent out automatically on a regular basis.
In our company, we use Service Autopilot. It saves us a lot of time.
Refine Your Demand Forecasts to Increase Profit
In order to increase profit, you have to avoid having too much or too little products to sell. If you have a lot more raw material or componentry than you need, you are going to end up spending money and time to store the overage. Even worse, you might have the material expire before it can be used so that you have to discard and replace it. However, if you find that you are short, it will be necessary to pay for expedited shipping and rush orders. This is going to increase your COGS.
Therefore, you want to make sure that you are accurately predicting the required inventory according to sales forecasts, seasonality, or historical demand to hep you with mitigating both of these problems.
Increase Your Order Efficiency to Help with Increasing Profit
Making sure the right products are sent to your customers when they order it will maximize profit and ensure satisfaction. If you’ve delivered the wrong item, first you’ll have to send them the right item, there will be another shipping charge, or even a third charge if you want them to send the original one back. Then you have to pay employees to receive the item that is returned, inspect the item, and then put the item back on the proper shelf or put it back in a package.
Along with this being a huge hassle, those costs that come with shipping the wrong item can be completely avoided.
Add Some Recurring Revenue to Increase Profit
This is a really great way that you can add some consistency in your sales. There’s two ways that you can do this – through MRR, which means recurring revenue that’s monthly, or ARR, which is recurring revenue that’s annual.
Add Services to Your Products to Help Profit
Consider offering routine maintenance and cleaning for an added fee. This can increase your customer’s satisfaction by taking on the burden of ensuring upkeep’s done effortlessly and on time.
Offer Product Subscriptions to Increase Profit
This is one of the most popular things that Amazon offers with their subscribe and save services. Customers can save money and time by having items sent to them on a regular basis and the business gets a regular profit stream.
These are 11 tips that you can use to help you increase profit in your business. We hope that you have found this to useful. Please feel free to contact us if you have any questions or you want to know more about the services that we offer.