Profitability is one of the essential number all small business owners need to track to generate cash buffers. Increase your profitability, cash flows in. Reduce your profitability and times are tougher for your business. Here are 7 strategies to improve your business’ profitability.
- Monthly Sales Targets
So many business owners run their businesses blind. They just go with the flow and hope for the best. If you are serious about generating profits and creating a cash buffer, you need track your business’ results. The first place to start? Tracking your sales targets. Figure out how many new customers/clients and/or products you need to sell per month to generate your desired profits. Then map out a plan that will get your business there. Depending on your industry, you might want to consider tracking daily sales targets or weekly sales targets. At a minimum, you should be tracking sales targets monthly. This provides you with actionable data to help you tweak your sales process until you figure out how to exceed those sales targets.
- Improve Your Internal Processes to Create Greater Efficiency
Efficiency in a business is a great way to improve a business’ profits. Streamline your systems and reduce or remove any processes and systems that do not add value to your customers and clients. The “well, cause I’ve always done it this way…” mentality kills any business’ progress. Business owners and managers need to constantly review and revise. You should always be looking for better & more efficient ways to offer your services, make your products, and cut out the BS. Efficiency grows profits!
- Pricing Strategy
Have you got a pricing strategy in your business and how’s it working out for your business? Lots of business owners think they need to offer discounts or compete based purely on price to make sales. This can be a disastrous strategy – both can kill your profits if not implemented properly… constantly think about the product/service margin in these strategies and is there enough room in the sale price to cover the costs.
- Profit Margin per Sale
The most profitable business owners we know track their profit margin every day, week and month. They know the monthly profit margin of their business each and every month. More importantly, they take it a step further and track the profit made on every sale. Why is this important? This helps to discover the most profitable products and services in the business. Allowing you to focus your employee’s efforts on promoting, offering and selling these more profitable products and services. Stop chasing sales that actually cost you money.
- Decrease the Break-Even Point
The break even point is the amount of sales you need to cover your business’ expenses. When you bring in more money than your expenses (break-even point), your business starts to generate a profit. To do this effectively, it’s important that know your expenses, track them, recognise what you spend your money on, and don’t let them get out of control. By keeping expenses low, you can keep your break-even point low…..this makes it easier to run yourself a profitable business.
- Add Value to Your Target Market
What is your Unique Selling Point or Value Proposition and how does this fit with your Target Market? This can be a hard thing to figure out. A lot of business owners think their customers care about what they care about. …BUT, in reality, their customers value something different. Talking to your customers might shed a different light on what they value and want from your business.
- Measure and Improve Your Sales Lead Conversions
Lead conversion metrics actually quantify the effectiveness of your sales process. Start by tracking the number of leads you have actually closes, out of the total number of leads for the month. Let’s say your business was successful in closing 10 out 100 leads this past month. This means you close every 1 out of 10 leads. So, if you can improve your sales to close 2 leads out of every 10, your number of sales has just doubled. This will have a significant impact on improving your business’ profitability.
Profitability is an important part of running any successful business. As you can see, there are numerous ways to improve your business’ profitability. Choose one of the above suggestions & give it a try. When you master that, start working on another strategy to improve your profitability. Feeling overwhelmed? Give us a call, our team can help you put these profitability strategies into place.