How to Boost Your Business’s Profits
Expand your market to boost revenue
Improve customer service
Stay visible with marketing and PR
Invest in your employees
Optimize your cash flow
Always be closing
Keep an eye on the future
Running your own business is a great way to turn your passion into a job. Regardless of how much you love what you do, the goal of any business is to make a profit. Sadly, many small businesses are not meeting this objective. Roughly two-thirds of small businesses don’t turn a profit or fail to make more profit than the year before.
If you are in this boat, you are not alone. But if you want to keep your doors open, it’s time to take action. You’ve worked hard on your business, and you deserve to be successful. But that requires the right strategies. Most small business owners have a deep understanding of their product or service, but they often lack the experience to drive profitability.
Luckily, there are key steps to improve business profitability, regardless of your product, service, or industry. This guide goes over the critical strategies businesses should use to improve their bottom line, and it provides actionable tips you can use to improve profits.
1. Expand your market
There are two sides to business profitability: revenue and expenses. Ultimately, you want to increase revenue while reducing expenses, and an effective way to increase revenue is by expanding your market. Think about additional products and services you can sell to existing customers or ways that you can bring in new customers.
Consider selling products that compliment your services. Or, consider expanding into new locations. A landscaper who has all the clients they can get in their community, for instance, should start looking for clients in nearby communities.
2. Focus on customer service
Make sure your business is committed to high-quality customer service. Happy customers are repeat customers, and even more importantly, they promote your business to their friends and colleagues.
The cost of obtaining new customers is a lot higher than the cost of working with existing clients. Make sure that you’re optimizing your customer base by providing great customer service.
3. Stay visible
People cannot patronize your business if they don’t know about you. Make sure that you take steps to stay visible. Have an active marketing campaign that includes a blend of paid advertising and public relations such as sponsoring the local softball team. Make sure you have adequate signage in front of your brick-and-mortar location.
4. Reduce unnecessary expenses
Carefully evaluate your expenses to ensure that you are not overspending. Look over static expenses such as insurance and rent on an annual basis and make changes as needed. Keep an eye on your suppliers and negotiate for savings whenever possible. Rein in incidental costs by creating and sticking to a budget.
5. Streamline workflows
Expenses aren’t the only place where you may be overspending and damaging business profitability. You can also lose a lot of money through inefficient workflows. Look at how you and your employees handle tasks and see where you are wasting time. Then, adjust processes to save time.
Seemingly small changes can make a big difference. Say you are running a line-of-business application on old servers, and employees are sitting idle for several minutes to run short reports. Upgrading your servers may require an upfront investment, but ultimately, that change means that employees can run reports in just a few seconds. That time savings adds up and saves you on payroll costs.
6. Invest in your employees
Your employees play a significant role in business profitability. Well-trained employees can perform tasks more efficiently, and they can also serve your customers more effectively. Take the time to ensure that your employees understand what they should be doing.
Also, remember that your employees are people, and they will be more productive if they are satisfied with their jobs. Meet with employees regularly to talk about their role in the company and how you can improve their experience.
Cash flow is often confused with profits, but it’s completely different. Cash flow refers to how cash flows in and out of your business. When you understand your cash flow, you can make more profitable business decisions.
Here’s an example. Imagine a business has $100,000 in revenue and $30,000 in expenses at the end of the year. They have $70,000 in profit based on these numbers, and theoretically, they have plenty of money to cover expenses and keep operations running smoothly.
However, this example doesn’t take into account the timing of the revenue and expenses. Let’s break it down a bit further. Now imagine they have $2,000 in monthly expenses ($24,000 for the year), but they had a $6,000 repair bill in February. They typically earn $3,000 per month in revenue ($36,000 annually), but they get a big contract at the end of the year where you have the chance to earn the remaining $64,000.
Unfortunately, they didn’t have an accounting system in place that helped with cash flow projections. They weren’t able to cove the repair bill in February. As a result, they couldn’t repair the equipment they needed to do the big job at the end of the year. They had to say no to that client, and their business profitability suffered. An accounting system that generates cash flow forecasts could have helped them avoid this situation.
8. Always be closing
Never let the opportunity for a sale pass you by. Turn every lead into a sale. Upsell existing customers. Make sure that you always have an elevator pitch ready to go so that when you meet a prospective lead, you can talk about your business.
9. Update your business plan
Finally, you need to have a plan. Where do you want your business to go? What are your objectives? Update your business plan regularly and make sure that you have a roadmap for success.
At Franco Blueprint, we provide the accounting and financial support you need to safeguard and improve business profitability. You cannot be profitable if you don’t understand the flow of your money, and we can help. To learn more about our small business accounting and CFO services, contact us today.