Many business owners will dream about a more profitable future while enjoying themselves in the summer sun or whilst on their summer break; making it the perfect time to reflect on where a business can make improvements.
The obvious option seems to be to simply cut costs or pass them on to customers by raising prices, this is not always desirable, or in some cases possible.
Here are Lamont Pridmore’s five top tips for profit improvement:
- Understanding your supply chain
When looking at your supply chain it is worth receiving additional quotes for the supply of the same service or raw material to see whether a competitor can offer a better deal.
By reducing input costs businesses will not only enjoy more profit, but savings can be passed on to customers, which could make a product or service more attractive.
- Pricing Strategy
If a business can get a better idea of their running costs then they may be able to more accurately review their pricing strategies.
Businesses should first conduct research into the prices charged for similar products from competitors before they start increasing their own prices.
You need to consider whether your product or service offers something more to a customer and what value should be placed against this benefit.
- Increasing the value of your goods and services
If a business intends to charge substantially more for what they offer then it might be worth increasing the value of the goods or services provided to make the price point match the product it intends to offer.
If a business can clearly demonstrate the value that they can add to a customer they will be in a much stronger position to charge more.
- Doing away with unprofitable goods, services and customers
As businesses expand, they tend to grow their product lines and services. However, what may once have been a profitable service or good may not always remain so – even when it continues to sell well.
Owners should, therefore, consider cutting products or services that simply don’t have a sufficient cost vs profit ratio. Similar rules can be applied to customers that regularly fail to pay on time.
- Understanding the economic model of your business and the key questions for economic success
It is vital to understand the economic model of your business which includes the profitability of the products and services you provide together with creating the profile of your ideal customer. Pricing differentiation, competitor analysis, delivering a quality customer experience and implementing a focused marketing plan will all increase your total revenue and are essential to your success.
Staffing levels, and their efficiency, together with the management of production costs and overheads will ensure the costs in comparison with total revenue produce the ideal level of net profitability and positive cash flow.
Innovation, the creation of new products and services, and investment in the capital assets you require to deliver outstanding customer satisfaction all add to the creation of a sustainable and profitable business.
Coming back from a summer trip invigorated with new ideas for profitability can be very empowering, but it certainly doesn’t hurt to run your ideas past a professional pair of eyes.
We have helped numerous businesses to improve their profitability by working with them on bespoke strategies for their future success.
To find out more about our profit improvement services, the Winning Company Questionnaire and the 6 key questions to improve the performance of your business, please contact us.