After the financial crises brought by COVID-19, every business’s ultimate goal is survival. Some entrepreneurs are at the breakeven point where they aren’t making any profits or losses. Likewise, many are financing their business through external sources to keep it operational. In all this chaos, they have lost sight of the bigger picture – profits. As things return to normal in 2022, it is time for every business to focus on profit maximization.
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Increasing profitability doesn’t mean you have to make drastic changes like rising prices or laying off workers. Instead, even small changes in a few areas of business can give your bottom line a boost. For starters, you can streamline the cashflows by increasing cash inflows. Similarly, look out for cross-selling opportunities to expand your market share in the industry. In addition to increasing profits, it will make your business stand out in the market.
Furthermore, focus on improving operational efficiency. Reduce downtime, increase productivity levels, and maximize input. If you want to learn more about this, have a look below. Here we are listing five viable strategies every business can leverage to boost profits.
1. Maximize Your Cashflow
Usually, businesses have a lot of cash flowing out and a minimal amount flowing in, making it difficult to pay for day-to-day expenses. And this, in turn, affects profitability. Therefore, you have to achieve a steady cash flow. For this, begin by redefining the payment terms with customers. Bring your financial managers on board and discuss a viable payment strategy. Since these experts are well aware of changing economic trends, they can develop effective financial strategies. Perhaps, you can offer discounts if a client pays before time. Otherwise, offer trade discounts on cash payments.
Moreover, consider offering continuing payment plans or pre-paid retainers for your clients. For example – instead of offering a one-off contract of $550 per hour for a full day, give them discounted 20-hour allowance for $450. Even though the hourly rate is less, you will bill for a higher dollar amount. In addition, it will lock the client in a long-term contract, increasing business profitability in the long run. Besides this, service-based businesses can create maintenance contracts since it is another way to develop a new revenue stream.
2. Raise the Marketing Bar
Previously, people used to talk about their business over cocktails and greetings, but that doesn’t happen anymore. Today, you have to give your business a prompt presence through online forums like Instagram, YouTube, or Facebook. In addition to paid ads, find fun ways to interact with your audience. For instance, you can conduct a live session to answer audiences’ queries and create brand awareness. Likewise, you can host giveaways to spread your brand message.
Moreover, you can set up meetings and special promotions using webinars. It will capture users’ attention, helping you gain valuable leads. You can also offer tutorials and demos for immediate download that will educate people about your product offerings. After picking the right marketing strategies, measure all your marketing efforts to determine which ones are lucrative.
3. Manage Your Costs
Sometimes, companies incur costs unnecessarily. They neither bring any value to the business nor contribute towards profitability. Therefore, it is crucial to identify those costs and eliminate them. Here we are highlighting a few cost areas for businesses.
- Suppliers: Can you negotiate better terms with the supplier? Most suppliers give discounts on bulk purchases; hence, you can cut back on raw material costs. Otherwise, buy on a just-in-time basis to make more effective use of your working capital.
- Production: Reducing wastage in the production unit can significantly lower the cost of materials. Also, check if you can adapt your product processes using a few working hours to scale labor costs.
- Premises: You can rent out vacant space in your business unit and earn a stable rental income to increase profitability.
4. Expand Market Share
At some point in time, every business should think of expansion. That doesn’t mean you have to acquire companies or launch new products; instead, move into new market areas. If your target audience ranges from adults to millennials, consider adding Gen Z to your list. Likewise, diversify your product offerings to target a broader market.
But before you start, research the potential opportunity and see if you can tailor products for the existing market. It will ensure those products provide revenue at minimal cost, ideal for increasing the profits. If there is demand in the market, team up with other key players in the industry. It would reduce the risk at your end while allowing you to benefit from their clientele. Initially, increasing market share might seem like a lot of hard work, but these small efforts can make a huge difference.
5. Boost Operational Efficiency
Considering today’s market conditions, the way you have always done things might no longer be the best approach. So, why not bring a few changes at the operational level? If you have been relying on manual inventory counts, think of automating the system. It will eliminate the chances of errors and mistakes, giving you an exact count of stock levels. In addition, it can even predict the demand, allowing you to order inventory accordingly. Thus, reducing the human resources and costs.
Similarly, you can make a few changes to internal operations. For instance, if you conduct weekly meetings, try cutting back on them. It will free up time, allowing employees to spend it on income-generating tasks. Likewise, evaluate the reports and documents your staff is creating and printing out. Do you need the printouts, or could they be stored on the cloud instead? These small changes will save enormous business expenses, allowing you to maximize profits.
The ultimate goal of every business executive and entrepreneur is to maximize profits without compromising on quality. You have to keep an eye on business expenses, optimize productivity, and find opportunities to increase market share. Perhaps, you can bring new products to the market or sell the same products to new audiences. Likewise, market your business to create awareness and generate leads. These few strategies will go a long way in increasing profitability.