As a small business owner, you want to make sure your business is as profitable as possible. But higher profit margins don’t just happen. Instead of hoping for good fortune to bring you more profit, make these smart moves to keep more of the money your business makes.
1. Know your profit margins. “What gets measured, gets managed” is a business truism. Knowing what your margins are is essential to improving them and will allow you to accurately calculate how taking actions such as raising prices will affect your margins.
2. Look for places to cut costs. Focus on costs that don’t add value for your customers. Start by looking for wasted money, such as memberships to groups you no longer attend or excessive spending on office supplies. Cutting even small unnecessary costs over time can make a big difference.
3. Raise prices. It’s the easiest and fastest way to boost profits. You’d be surprised at the difference a price increase of 10 percent, 5 percent or even 3 percent can make to your margins—and most customers won’t even notice.
4. Streamline your payment processing and invoicing. Invoicing customers as soon as possible avoids payment delays so you get your money faster and it can work harder for you.
5. Negotiate with your vendors. Can you get lower prices from your vendors—perhaps by paying early or paying in cash? Finding a win-win arrangement with vendors can mean more dollars in your pocket.
6. Reassess insurance costs. Shop around for health insurance, business insurance and vehicle insurance. See if increasing your deductible or adjusting your coverage will reduce your premiums.
7. Consider relocating your business. Can you move to a more affordable location? Could you run your business from home and have your employees work remotely?
8. Reduce excess inventory. The cost of carrying inventory that’s past its prime can eat up your profits. Consider selling it to liquidators or posting it on sites like eBay.
9. Track the cost of customer acquisition and work to reduce it. Monitor the results of your marketing and advertising activities so you can focus on those that deliver the most bang for your buck.
10. Identify high-value customers and focus on them. Use customer relationship management (CRM) or customer loyalty software to pinpoint which customers spend the most with your business. Give them the VIP treatment and see if you can get them to spend even more.
11. Get existing customers to buy more and more often. Acquiring new customers is more costly and time-consuming than convincing existing customers to buy from you again. Develop a marketing campaign to turn first-time buyers into loyal customers.
12. Narrow your target customer focus. If you try to be everything to everyone, your business will lack an identity. Instead, laser-focus on your ideal target customer and how to deliver value to them. You may have fewer customers, but you’ll sell more to those you have.
13. Upsell and cross-sell. Don’t stop with closing the sale. Offer related products or services, warranties, service contracts and other value-adds that increase your profits.
14. Set up automatic re-ordering or subscription options for customers. If you can make buying more convenient for consumers, they are more likely to become loyal customers.
15. Spend your time where it matters. As a small business owner, your time is valuable. Focus your efforts on profit-generating activities, not on managing minutiae.
16. Look for places to automate your business. For example, using marketing automation software to respond to leads or a virtual assistant to schedule meetings can free up time for you and your team have more time to focus on profit-generating work.
17. When an employee quits, don’t fill the position right away. See if you can automate the work or distribute it among remaining staff members.
Increasing your profitability is a never-ending battle. Stay on top of your business’s cash flowand watch your profit margins closely. Then you’ll be able to spot new opportunities to bring home even more profit.
About Rieva Lesonsky
Rieva Lesonsky is CEO and Co-founder of GrowBiz Media, a custom content and media company focusing on small business and entrepreneurship, and the blog SmallBizDaily.com. A nationally known speaker and authority on entrepreneurship, Rieva has been covering America’s entrepreneurs for more than 30 years. Before co-founding GrowBiz Media, Lesonsky was the long-time Editorial Director of Entrepreneur Magazine. Lesonsky has appeared on hundreds of radio shows and numerous local and national television programs, including the Today Show, Good Morning America, CNN, The Martha Stewart Show and Oprah.
Lesonsky regularly writes about small business for numerous websites and for corporations targeting entrepreneurs. Many organizations have recognized Lesonsky for her tireless devotion to helping entrepreneurs. She served on the Small Business Administration’s National Advisory Council for six years, was honored by the SBA as a Small Business Media Advocate and a Woman in Business Advocate, and received the prestigious Lou Campanelli award from SCORE. She is a long-time member of the Business Journalists Hall of Fame.
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