Get your business profits soaring in 8 easy steps
If your small business isn’t turning a healthy profit yet, you need to be more profit-focused if you want to make a long-term success of it. Profitability doesn’t mean maximising your own gains by squeezing others. Rather, it’s about building your business sustainably so that it can keep going when the going gets tough. Here are a few simple suggestions for how to accelerate your profit drive and help your business to thrive.
1. Focus on making profits today. There’s no time like the present so don’t wait till the end of the month to find out how profitable your business has been over the last 30 days. Make sure your sales staff – and other revenue-generating employees – know exactly what their monthly targets are, and how they’re doing on an hour-by-hour basis. This should spur them on to improve their performance.
2. Assess your marketing needs carefully. Marketing and advertising budgets will vary enormously from firm to firm. However, all businesses – big and small – should be making the most of the resources available to them. You should know not only what you are spending on various media – from direct mail to print and online advertising as well as social media campaigns – but how effective each form is in terms of reach. If you’re not currently measuring the ROI of your marketing strategy, you could be wasting precious resources and making a serious dent in your profitability.
3. Solicit opinions from the bottom up. Very often in business the people with the best ideas are those actually doing the job. So why don’t managers seek suggestions from staff more regularly? Ask your employees what they would do to improve business operations and try to implement suggestions where practical. Not only will you get some good ideas free of charge but it will show your employees that their opinions are respected and that they’re part of a team.
4. Charge correctly for value added. The way you price your goods or services is not a matter of how cheap or expensive they are. It’s about how you calculate the value you’ve added and charge for it accordingly. If you’re legitimately adding value, your customers should recognise that and be willing to pay – and if not, you probably shouldn’t be in business in the first place! Staying competitive requires you to regularly assess the value you’re adding in a fast-changing market.
5. Incentivise. If you want your employees to deliver record profits, you’ve got to make it worth their while. For example, offer your staff bonuses and other perks for meeting measurable performance targets. While material rewards will drive some employees on, others may be better motivated by the promise of time off, flexible working arrangements and other non-material incentives. You could also encourage some healthy competition among your staff by running an “employee of the month” competition.
6. Don’t cut costs by cutting corners. You’re better off paying more for high-quality and reliable suppliers rather than always going for the cheapest option. While this may cost you more money initially, you can make savings in other ways – for example, by building a long-term relationship and offering reciprocal business concessions. Requesting favourable credit terms or asking for a year-end rebate based on work volume provided are other ways to make your money go further – and boost your profits at the same time.
7. Cultivate good business relationships. The key to a sustainable, successful and profitable business is to establish and maintain good relations with those around you – not just your customers and clients but suppliers and staff too. You can’t do it alone so create a strong team and work hard to build trust. Treating people well in your business relationships creates a virtuous circle of supporters who will help you and your business to become successful.
8. Don’t spread your business too thinly. Many companies think they need to diversify, rebrand and constantly innovate in order to boost profits. However, the most successful companies are often those with the simplest business models. They focus on a core idea and do what they do better than their competitors. Overcomplicating or diluting your brand identity will confuse your customers and allow them to be poached by your competitors.
Running a more profitable small business isn’t a matter of cutting costs, squeezing suppliers and shortchanging customers. That may maximise your short term gains but will doom your small business to failure in the long term. Instead, focus on building a strong and sustainable business that provides genuine value and treats people with respect. Take care of that, and healthy profits will surely follow.