Learn how to increase profit quickly with these 7 tactics.
There’s bound to be something in here that you can apply immediately.
- Increase Prices
- Compare Quotes To Results For Jobs, Projects & Sales
- Renegotiate Rent
- Change Suppliers and Eliminate Unnecessary Expenses
- Sack Expensive Customers
- Use Processes To Eliminate Costly Mistakes
- Introduce A Higher-End, Luxury Product or Service
- Increase Sales Overall
- How To Increase Profit Margins – Final Thoughts…
I know, it sounds ridiculously easy.
In fact, it’s so easy that most people in business dismiss a price rise, thinking that, “my customers would all leave if I did that”, or even “it’s just not fair to increase the prices, I couldn’t possibly do that!”.
Yet whenever my clients have done this (and over 80% have used it as a strategy) their profit margin and bottom line profit have substantially risen, without losing any good clients.
Do the maths and work out what an extra 5-10% on your price would do to your profit margin. Because it’s all going straight into the gross profit side of the sale, it makes every one of your products and services more profitable and this extra income goes straight to your bottom line.
You will be surprised at just how easily you can increase profits for your business.
This is one of many tips to increase profit in my award-winning book, Double Your Business.
Compare Quotes To Results For Jobs, Projects & Sales
Many companies that do projects, like alarm or electrical installations, provide a fixed-price quote for the job.
But then they don’t actually track the real cost of doing the job versus the quote. This means that profit margins are often wildly different to what you are quoting.
But this is quite an insidious problem. Because when you quote for good profitability, it’s easy to assume that after the work is done that you’ve achieved the quoted profit margins without properly vetting the costs.
So what should you do if you find that your business is nowhere near as profitable as you expected it to be?
Well, the first place to look if profits are disappointing is at your actual cost of sales, versus what you quoted.
There is almost always a gap. Sometimes that gap is so big, you’ll be losing money hand over fist. Sometimes it’s just enough to pay for a nice holiday or two. Other times it’s the difference between just surviving versus earning a great income.
While not commonly considered, most landlords would prefer a tenant on a lower rent than an empty unit. Get into a constructive negotiation with your landlord and see if you can reign in the monthly rent.
If you can’t cut your rent, have you considered buying your own business premises? This is a great way to create a new long-term asset for your business. While it’s an initial big outlay, it means that you can extract more money from your business because instead of wasting money on rent, you’ll be paying off a mortgage to buy your own commercial premises.
This is a very cool way to increase the real, bottom-line profit from your business. Even though it may not be listed as a bottom line profit increase, it’s actually money going into your own bank, rather than somebody else’s profits.
Finding this useful? For more ideas on how to increase profit, click here to download 21 Ways To Increase Sales for many more free ideas.
Change Suppliers and Eliminate Unnecessary Expenses
Profit is obviously the difference between sales and costs, so when considering how to increase profit in your business, it pays to look closely at your supplier costs.
An easy way to do this is to go back through all of your monthly spend and find new suppliers, or negotiate better deals with existing suppliers, so that you’re getting the best deals from them.
If you have a growing business, this is especially important. The bigger you are, the more you’ll be spending with some of your suppliers.
Volume discounts are a ‘hidden secret’ in many industries, allowing you to pay less for your products that are re-sold, giving you more gross margin with every sale you make.
A good target to set for saving money on suppliers is to cut 10-20%. This comes from doing some research and shopping around a little, too.
Going beyond simply negotiating cheaper products or services, you should also look for items that you can simply stop spending on altogether.
For example, many business owners buy Software as a Service (SaaS) products for things like team communication, planning, social media management and so on. While they plan to use them, often they don’t have time to do so, and they become unnecessary expenditure
If you’re not using this ‘software stack’ in your business, it can quickly add up to a lot of wasted costs. Of course, it’s not limited to just software costs. Do you have phone contracts that are no longer needed? Maintenance contracts for items you no longer have? Are you over-insured (many businesses are!). The list is almost endless.
Take a fine-tooth comb through your regular costs. Simplify your spending and save money wherever you can. Every penny that you save is instantly a penny more profit going directly to your bottom line.
While this may be detailed work, it is exactly how to increase profit from your business.
This trick of doing a cost review can save hundreds, even thousands of pounds every month, making a real difference to many small businesses.
Sack Expensive Customers
You know the kind of customer that calls 3 times a week, spends half an hour moaning about your prices, fights every invoice, pays late and expects special favours? They’re costing you money.
Look at the profit per hour of your worst customers. If there are some that really not profitable at all for you, have a discussion with them to explain that you need to change the way you work with them.
You can either ask them to pay more, if you sell services. Or you can reduce the level of service you provide to them.
Another thought is to offer them different services via cross-selling, up-selling or down-selling into something that’s more profitable for you. How you increase profit from any given customer can be flexible – just make sure you’re not working for free.
Ultimately, if you’re selling products and services without any profit, you’ll rapidly get into trouble. To protect your gross margin, you must take action. Even if that action is drastic – and let these unprofitable customers go.
While this may seem difficult, it is even more difficult to explain to your staff that the business is losing money and that you will have to let somebody go. It’s an awful position to get into, so make sure you don’t suffer in silence. If you need to make more money from certain customers, deal with them one way – or the other!
Use Processes To Eliminate Costly Mistakes
If you waste a lot of your time fire-fighting and dealing with issues, you are wasting a lot of time and energy.
Growing your business means being efficient and smart with your time.
Investing the time to systemise your business will mean that people know what to do, even when you’re not around to answer questions.
Systems eliminate mistakes before they happen, make life simpler for your staff and take the drama out of the day to day business.
They’re also a great way to increase profits; when you make no mistakes, expensive waste is eliminated, making you more efficient and profitable.
Introduce A Higher-End, Luxury Product or Service
A clever way to increase profit margins in your business is to offer a luxury or specialist product that’s attractive to the top 20% of your customers.
In fact, many businesses focus on the highest value customers completely and become highly profitable as a result.
Offering the best service and product in your business is a great unique selling point when it’s done well.
It’s what Apple do – selling just 10% of the global smartphones by volume, but picking up some 70% of the available profit. Less work, more profit, on a massive scale.
In terms of a more everyday example, just think about car manufacturers.
They offer variants of their vehicles – a basic model and also luxury and sports variants. Even washing machines come in basic and top of the range models, with the differences being minor to the cost-base, but profound for the profit margins of the final products.
This allows them to increase prices further than usual, giving them better margins for the same basic product.
Increase Sales Overall
Sometimes a business is not very profitable because the fixed costs are just too high for the volume of sales. Once you’ve trimmed your expenses as far as you can go, the next item on your “how to increase profit” to-do list is to make more sales.
There are hundreds of ways that you can increase turnover, grow your customer base, produce more sales and add to your profit margins. If making sales is a weakness for your business, developing a more commercial approach may be exactly what you need to do. Perhaps consider working with a business coach to help you develop strategies to increase sales and profits would be a smart move.
How To Increase Profit Margins – Final Thoughts…
Above all, though, you need to take some action. Your business can increase profits, of that there is no doubt, but only when you take action…
I have put together a special guide that shows how to increase profit with many more ideas. You can click here to download 21 Ways To Increase Sales for free.