4 Strategies to Increase Small Business Profits
To grow a profitable small business, owners must stay laser focused on the items that matter most. Here are 4 ways that will help small business owners stay on the fast track to increased profits.
1. Make Financially Responsible Resource Decisions
Profitable small businesses evaluate the productivity gains from people and resources. Before you add an additional employee or purchase equipment, consider the direct and/or indirect impact the investment will have on your bottom line. Will hiring that extra employee contribute to greater business profits? Will that extra oven produce enough pastries to cover itself in the next year? Evaluating break-even scenarios helps small business owners make educated resource decisions.
2. Seek Gains in Efficiency
Efficiency is finding ways to get the same or greater value with a lower investment. Small businesses can increase their profit potential by keeping an eye on even the smallest of gains. Evaluating routine fees, like reducing banking or loan fees, or discontinuing memberships that aren’t providing good return, are easy ways to drop more profits to the bottom line. Small businesses should set semi-annual calendar reminders to also look at other recurring fees to see if there are more cost effective solutions (e.g., web hosting, email marketing service providers, or phone and internet service). In addition, evaluating whether leasing equipment makes more business sense than purchasing, or making sure employees turn off all lights when closing to save on the electric bill can all add to the profit margins of a small business.
3. Set Sales Goals
The earlier a small business commits to paying attention to their sales, the better. Start by setting monthly sales targets. Many small business owners fall into the trap of becoming overly engrossed in day-to day-operations. By setting sales goals, small businesses stay attentive to long-term success and ensure they are consistently challenging themselves to think of ways to create future sales, and evaluate short-comings. One way to encourage a group effort by your employees is a friendly weekly or monthly sales challenge. Offering a nominal monetary reward with recognition can also go a long way with your employee retention.
4. Evaluate Pricing and Sales Strategies
Use pricing and sales strategies that drive profitability. If all three strategies are aligned to support profitability, your business will be more successful. Pricing can be tricky. Profitable small businesses make sure they include hard and soft costs in their pricing models. In addition, they do not undersell their products or services to drive a high-volume. Many small businesses make the mistake of regularly discounting their products or services, which can establish a price expectation from customers that diminishes profit margins. Simple ideas, like training your team to ask if customers would like to add a complimentary service to the service they purchased, or creating membership programs that reward loyalty, are quick-to-profit strategies that support solid business profits.
Be a Savvy Small Business Owner
The bottom line is small businesses must keep their revenue higher than their costs to operate a profitable business. By implementing focused strategies to reduce cost and implementing sales driven decisions to increase revenue, small businesses can optimize their profits.
