Strategies to improve profit
Once you have identified and measured your key profit drivers, you should develop strategies to grow them, without increasing costs. Making your business more profitable involves looking at ways to increase sales revenue as well as decreasing your costs and benchmarking your business to see where you can save money.
You should also prioritise the strategies you've chosen to improve your profit so you can focus on the most important ones.
Strategies to increase sales revenue
- Increase productivity of your staff — recognise and reward staff contributions with staff performance reviews, and teach them sales skills and how to upsell products so customers make multiple purchases at one time
- Develop new product lines — survey your customers about new products
- Find new customers — new customers can help grow your business
- Find new markets — use market research to determine if you could expand your business into new areas
- Customer service — improve your customer service and develop a staff training program
- Increase your prices — check if you have priced your goods and services correctly and if you could increase prices without reducing sales
- Price discounts — consider price discounts and promotions to increase your customer base (e.g. 2-for-1 deals or happy hour)
- Retail displays — use effective retail displays to increase your sales
Strategies to decrease costs
- Decrease inventory — stock control is a good way to streamline your business
- Decrease direct costs — make sure you have the right suppliers for your business and negotiate for better prices or discounts for buying in bulk
- Decrease indirect costs — for example, try to minimise waste and errors in your business by training staff, or reduce marketing costs by using low-cost marketing techniques
- Decrease overheads — for example, save energy wherever possible or try find a cheaper energy supply company
- Benchmark key financials — benchmarking your business helps you compare your costs (like rent and utilities etc.) to similar businesses in your industry to see if you are paying too much
Prioritise your strategies
Once you have chosen strategies to make your business more profitable, you should prioritise them in order of importance. It's a good idea to write down your goals and the corresponding strategies to achieve them, and also how you plan to implement your strategies.
Focus on your more profitable items
Your products or services with the highest gross profit margin are the most important to your business, as they generate more money. Once you have identified your most profitable items you should concentrate on achieving higher sales targets for them. This may require you to rethink aspects of your business or to devise strategies for improvement. Consider using a business adviser to help you.