When you hear the words business growth, what pops into your mind? Is it revenue, sales or maybe new customers? What about profit? What are you doing to build profit in your small business? Is it a priority or an after-thought?
There are a lot of ways to build profit in your business. Cutting costs is the obvious one. While keeping costs down is important, put adequate resources (time and money) into other areas – and keep your focus on the bottom line. Be a profit builder.
5 Ways to Build Profit
#1 – Grow sales of higher margin products. Products and services, like customers, are not created equal. The growth of low-margin products can actually reduce your overall profit. Do you know which products or services deliver the highest profit margins? You should. Then put your marketing and sales efforts into selling more of those.
#2 – Gain efficiency with systems. This is especially important in businesses that rely on labor to deliver their products or services. In a service business, you are only as good as the people doing the work – so their efficiency and effectiveness are critical to your profitability.
Take advantage of technology to save time. Utilize checklists so employees have the materials they need when they arrive at customers locations. Have a system for add-on sales opportunities. Schedule work to minimize drive times. Eliminate duplicate work. These are just a few – I’m sure you can find others in your small business. When you do, enjoy the extra profit that comes from doing more with less.
#3 – Eliminate re-works that come from poor quality. Re-works or callbacks are profit busters. It costs you money to re-do the work – and you also lose the opportunity to serve someone else with that person or crew. Make quality a priority. Get it right the first time.
#4 – Profit from your pricing. When you use a standard markup and cost to set prices, you ignore the most important ingredient – value. This comes from being better or different. Your pricing should reflect your quality, uniqueness, and convenience. Don’t be afraid to charge more when you can. As a small business, discounts and low prices will always work against you. Avoid them unless you have a strategic reason for doing so. More sales at any cost is not a recipe for optimizing your profit margins.
#5 – Improve your marketing ROI. Marketing is an investment. It’s not about how much you spend, but how effectively you apply your resources – time and money. In fact, many of my clients are spending less and getting more revenue. You can too with a few changes: better targeting, emphasis on retention, compelling messages, diverse tactics, and a system that converts more leads. Marketing is not about getting leads – it’s about getting quality sales through current and new customers.
As you can see from these examples, profit-building requires a whole-business approach to growth – not just sales. Your people, systems, marketing and daily operations all play an important role – so leverage them. With small improvements in all these areas, you’ll grow both sales and profit. And that’s a recipe for a better business.
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