Would you like to make more money from your business?
I bet you would!
In fact, one of the main reasons that most people go into business is to make more money. Now, you may be thinking “I don’t want more money, I want more time”, but if you are making more money, you can pay someone to do the things that your currently do, meaning that you will spend less time working and more time doing the things you want to do. As they say, “Money isn't everything, but it’s up there with oxygen!”
So, here are my 5 top tips on how you can increase your profit in your business. They are actually really quite simple and if done properly, they will make a huge positive impact to your bottom line.
1. Increase your prices
When was the last time you put your prices up? Increasing your prices will increase your profits immediately.
If you’re worried about increasing your prices, please remember that most of your customers will accept a price increase providing you give them a good reason. The ones that don’t, well they probably aren't your best customers anyway. You may find that the customers you lose are the ones who take the most of your time and effort, want everything done yesterday and cause you the most stress. If you ever heard of the Pareto Principle, also known 80-20 rule, you will know what I mean. Most businesses get 80% of their business from 20% of their customers.
There are many reasons why customers buy from you, and price is only one of them. For example your customers have a good relationship with you, they like the service you provide or you are in a convenient location. Some customers simply can’t be bothered shopping around to find someone cheaper. Depending on your industry and the amount of your increase, some people will not even notice you have changed the price!
2. Negotiate with suppliers
The second thing is to negotiate with suppliers. If you are buying stock or using contractors, negotiate to get their rates down once again will increases your gross profit. Increasing your gross profit is going to increase your net profit and it’s going to mean that at the end of the day, there is more money left over to go into your back pocket.
3. Sell more higher margin goods
What I'm talking about is selling products/services that have a higher gross profit margin. For example; if you've got some products that you buy for $50 each and you sell them for $70, you will make you $20 profit. If you've got some products that you buy for $50 and sell for $100, you will make you $50 profit. So, it makes sense sell more of the $100 product, rather than the $70 product, because you’re going to make more profit.
One great way to ensure you sell more of your higher margin products is to give your sales people an incentive to sell them, i.e. you might like to reward them with a team outing at the end of the month of give them gift vouchers. You can also encourage your customers to buy these products by emphasising the added value they will receive by buying a better quality product.
4. Reduce fixed costs
Reducing your fixed costs can be quite tricky, however, in every business there is always room for improvement. First, analyse your existing costs, then put a budget together and ensure that someone is accountable to the budget. Ensure that expenses over a certain amount are approved by the individual’s manager so you don’t incur large expenses that you are unaware of.
Also put some sort of control on your fixed expenses, and make sure you are reducing them as much as you can. Whatever you save ends up in your back pocket.
5. Increase your sales
In a many circumstances, there are businesses that could increase their sales without increasing the cost of delivering sales. If you are doing $100,000 a month, it’s quite possible that you could do $120,000 a month before you have to hire another person, get a bigger premises, buy another van or a new piece of equipment. If you've got the resources, make sure you are utilising them to their full potential. Maximise your capacity because then you’re going to maximize your profitability.
There are many other things you can do to become more efficient and make more money in your business. I've just touched on these 5 things because I believe they are the most important areas you can start working on today that will put more money in your pocket.