‘I know I need to increase my profit, but how’ – Annon.
Larger profits often depend on doing the little things better – rather than what we like to call ‘the silver bullet’ that everyone seems to be looking to load into their business gun.
You’ll need to focus on every little detail to reduce your expenses and increase your sales turnover.
⬇️Decreasing your costs
For most small businesses, often the easiest way to increase profitability is to reduce costs. Reducing direct costs can dramatically increase your profit on each sale, while eliminating unnecessary business overheads (do you really need that ‘insert cost you don’t really need here’ 😅).
🙋🏼♂️Challenging your direct costs
Identify the steps you can take to minimise your direct costs. How you say?
👍🏻Negotiating lower prices with your suppliers.
👍🏻Reviewing processes and systems to minimise waste.
👍🏻Implementing additional security to reduce the chance of theft.
For example, you may have had one food/power/phone/stock/etc. supplier for the last five years. It might be time to challenge your supplier on their prices while introducing yourself to others in the market that might do a better deal.
A lot of your business costs could be put out for review, such as insurance, power, and Internet.
Simple wins right?
Well set up systems will help you minimise errors, save time and money. The time invested in building your processes is usually minimal compared with solving a problem from scratch each time.
Turn repetitive decisions into procedures anyone can follow to avoid having to make the same decision again – or sort out the same issues repetitively.
Learn from mistakes and problem areas, and if systems go wrong, fix them. Review your systems periodically to see where improvements can be made.
🔎Stay focused on profitability
Actually focusing on profitability can have a dramatic impact. Even if cash flow is your top priority, it shouldn’t be at the expense of profitability. Monitor your actual costs against your budgets, and your sales against your forecasts.
🏃🏼♂️Measure staff performance
Monitor and measure staff performance and productivity. Be sure to reward productive staff members however you see fit.
It’s important to praise and thank staff when it’s been earned. Aim to provide a clear career path so your staff can grow, and they don’t see their prospects as limited.
Empowering staff to make decisions is an often important step to improving the speed a business operates at.
A planning cycle greatly enhances your ability to make continuous improvements. Thorough and regular planning also helps you anticipate problems and adapt as your circumstances change. How do you do that?
Set measurable, time-limited targets – to monitor how effectively your plans are implemented.
Review what you’ve achieved – so you can learn from your experiences and make further improvements.
Keep improving your underlying systems and your planning process – but be ready to alter your strategy if necessary.
That’s probably given you a lot to think about so we’ll get into increasing turnover and selling more on a later post.
All the best!