5 Simple Ways to Increase Profits in Your Business
Profits measure your earnings after subtracting costs and remain a top priority for any business. Some companies can operate at a loss for extended periods, but most will have to demonstrate profitable operations to remain in business for long. Of course, every business owner wants to increase profits, but how do you go about doing so?
From reshaping your pricing model to outsourcing your financial services, explore this list of profit-increasing strategies to boost earnings and add value to your business.
1. Increase Sales Frequency
Unless the product is a “loss-leader” that is intentionally priced to attract customers or create up- and cross-sale opportunities, every sale should generate a profit. As a result, increasing the frequency of sales should naturally result in higher profits.
However, every sales manager would already be selling more if it was that simple. You will need to develop a plan based on your business’s capabilities, products and services, and target customer demographic. Consider the following avenues to increase sales for your business:
- Subscription options – Subscriptions were once mainly confined to magazines, but SaaS platforms, streaming services, monthly boxes, and more have adopted the model and demonstrated its viability for myriad industries. Lower monthly pricing continues to draw consumers in and provide a method of consistent sales for businesses.
- Targeted discounts – It may seem counterintuitive to offer discounts when attempting to increase profits. That said, targeted discounts could increase your sales volume, offsetting any profit lost due to reduced pricing. Targeted discounts may also help you connect with new customers and motivate those returning.
- Loyalty programs – Encourage your client base to continue supporting your business by offering them rewards based on their purchase history. A loyalty program can provide a unique gift after a set number of purchases or use a point-based system attached to every purchase to prompt customers to shop more frequently.
2. Increase Sales Amount
As opposed to increasing how often people purchase your goods or services, your business might be better served by increasing the total amount spent by customers per transaction. Although the quickest method is to simply raise prices, that can just as easily drive customers away. Instead, consider alternative strategies that encourage larger sale amounts.
Effective ways to increase individual customer sales amounts could include:
- Bundles – Offer your customers a combination of goods or services at one special price. Bundles offer real incentives for larger purchases or a way to sell items that may provide better margins. For example, creating a computer bundle that includes accessories most people purchase anyway will provide them with convenience and a lower price than individual items but gives you much more control over the sold products.
- Up-selling or cross-selling – Related items, upgradable options, and add-ons are an excellent way to increase sales per customer while providing your client base with more options. Provide materials and create talking points that help sales staff inform your customers about the products they might enjoy in addition to or instead of the purchases they are considering.
- Focus on marketing – Marketing campaigns offer a way to get the word out about your business and guide customer purchasing habits—steering them toward purchases that will help generate higher profits. For example, tiering your products between basic and premium can help you promote whichever provides better margins more effectively.
#3. Evaluate Pricing
If profits are stagnating, a new strategy might not be enough to increase sales amounts, and it may be time to reassess your pricing. Material costs, inflation, and other factors can increase the cost of doing business, which must be factored into your overall pricing. In fact, in 2022 alone, consumer prices increased by more than 9%.
When increasing prices, it is vital to have your customers’ expectations and experiences in mind. Effective pricing strategies could include:
- Monitor your industry – Are you the only business in your sector considering a pricing increase? If other firms are also raising prices, you can stay competitive by aiming for the average increase—or just below it to potentially attract new customers.
- Incremental increases – Set a new target price but consider making incremental increases over a series of months to avoid shocking your customers. A higher price may be more easily accepted if you have taken weeks or months to fully initiate the increase.
- Smaller packages, same price – For many businesses dealing with increased costs, offering customers a slightly smaller amount of product for the same price can help alleviate the strain of increased prices.
- Break down fees – Customers generally appreciate knowing precisely what they are paying for or why prices have gone up. If you increase your overall prices, consider breaking down individual fees and offering transparency regarding the new structure.
#4. Reduce Costs
Every business has expenditures. From equipment to office space, running a business costs money and many of these expenses are unavoidable. That said, there are several ways to reduce your overall business costs without reducing efficiency.
Investigate the following methods for reducing costs at your company to achieve increased profits:
- Conduct an internal audit – The first way to get an accurate picture of the real costs within your business is by conducting a thorough internal audit. Depending on your operations, this may require a review of suppliers and production processes or vendors and infrastructure that facilitates service delivery.
- Outsource services – Financial management, payroll, and back-office support are essential for thriving businesses, but these roles can add significant costs (e.g., hiring administration, employee benefits). Fortunately, you have the option to outsource these services to financial professionals like a virtual CFO.
- Utilize automation – Repetitive and time-consuming tasks may be streamlined or eliminated entirely through digital automation. Email campaigns, data entry, and low-level administrative tasks could all be automated, potentially cutting down your expenses.
#5. Increase Efficiency
Maximizing productivity and streamlining operations can bolster a business in several ways, especially your profitability. With an optimized team, you may experience less wasted resources, less wasted time, and even a morale boost that could correlate to increased profits.
Practical strategies for increasing efficiency include:
- Restructuring – Sometimes, a business needs a structural shakeup. If your team is getting complacent or slowing down, a smart restructuring plan could help position team members for optimal success.
- Increasing flexibility – Work-from-home, flex-time, and flexible work schedules can lead to a new level of productivity for some employees. Not only that, but flexibility can attract more qualified candidates to your business, raising the overall quality of your team.
- Creating incentives – Challenges and incentives are powerful ways to increase productivity and refocus your team on your business at large. From bonuses to friendly competitions, give your employees an opportunity to rise to the occasion.
CFO Hub: Streamline Your Services, Increase Your Profits
Profits are the lifeblood of any business, and by exploring the strategies outlined above, you will be primed and ready to achieve your goals. Implementing new profit-generating strategies can take some time, but you can make a major impact today by connecting with CFO Hub.
Interested in slashing your financial costs and upgrading your services simultaneously? At CFO Hub, our team offers industry-specific solutions and expertise to keep your business on track. From controller services to DCAA compliance, we are ready to help you secure your financial future. Visit us today.