Gaining larger profits depends on accomplishing all the little things better – rather than making one huge change. You’ll need to focus on every little detail to reduce your expenses and increase your sales turnover over the coming 90 days.
For most small businesses, the easiest way to increase profitability is to reduce costs. Reducing direct costs can dramatically increase your profit on each sale while eliminating unnecessary business overheads.
Identify the steps you can take to minimize your direct costs, such as:
For example, you may have had one food supplier for your restaurant over the last five years. It might be time to challenge your supplier on their wholesale prices while introducing yourself to others in the market that might do a better deal.
Some of your business costs could be put out to tender, such as insurance, power, and the Internet.
Useful systems help you minimize errors – and save time and money. The time invested in creating systems is usually minimal compared to solving a problem from scratch.
Where appropriate, turn decisions into policies to avoid having to make the same decision again – or sort out the same issues repetitively.
Learn from mistakes and problem areas, and if systems go wrong, fix them. It’s a wise idea to review your systems periodically to see where improvements can be made. For example, if your software firm decides to place all its information on a central server, to ensure staff can access it any time, hours of productivity can be saved each week.
Focusing staff awareness on profitability can have a dramatic impact. Even if cash flow is your top priority, it shouldn’t be at the expense of profitability. Monitor your actual costs against your budgets and your sales against your forecasts.
Monitor and measure staff performance and productivity. Be sure to reward productive staff members by linking rates of pay to effectiveness.
It’s important to praise and thank the staff when it’s been earned. Aim to provide a clear career path so your staff can grow, and they don’t see their prospects as limited.
A simple planning cycle greatly enhances your ability to make continuous improvements. Thorough planning also helps you anticipate problems and adapt as your circumstances change. Aim to:
To improve your turnover, look for new markets and distribution channels.
For instance, are you really making the best use of the Internet? Can you form a strategic alliance with a complementary business or a joint venture to tackle work you don’t have the resources for on your own? Some ideas to help you increase turnover include:
To improve overall profitability, review your sales and profit margins periodically. Divide your services or products into four categories, namely:
Consider any possible effects before making decisions. For example, a low-profit product might be the one that brings other business from a major, highly profitable customer.