3 Ways to Immediately Increase Profits In Your Business
Your business may be performing spectacularly, so why do you feel like you’re barely scraping by? Perhaps you’ve come dangerously close to overdrafting your account. Or you have a sneaking suspicion that you should be able to pay yourself more, but just can’t seem to make that happen.
Both new and seasoned business owners grapple with this problem every day, so you’re not alone. And luckily, there are things you can do to increase your business profit quickly and (relatively) painlessly!
But First, The Difference Between Revenue and Profit
Increasing your business revenue won’t automatically increase your profits. Revenue is all the income your business generates before taxes or expenses, whereas profit refers to what’s left over after you subtract taxes and expenses from revenue. So if your revenue increases but your expenses increase as well, your profit may stay the same – or even decrease!
The best way to get a handle on your business’ profitability is to create a simple business budget. I also recommend using a Profit First approach to take control of your cash flow. The basic premise of Profit First is to pay yourself first and only take on expenses you can afford with what’s leftover.
With that being said, here are three easy ways to immediately increase profits in your small business!
1. Cut Unnecessary Expenses and Overhead Costs
We all do it. We sign up for subscriptions that we never end up using and then forget to cancel them. Or we insist on buying the cute, expensive office supplies that maybe made sense when you were a solopreneur, but not now that you have an office full of employees. The point is: You probably have unnecessary expenses in your budget that are eating away at your profit.
Review your business budget carefully to spot pesky expenses that aren’t adding any value to your business or your clients. Some common unnecessary expenses that many of my clients have found in their budget include (but certainly aren’t limited to):
Expensive technology platforms
Energy inefficiency
Subscriptions
Conferences and trade shows
Keep reading to learn more about each and see what you can do about them!
Expensive technology platforms
If you’re paying for costly premium technology services or software, could you find another platform that offers similar capabilities for free or for a more affordable price? Think platforms like Microsoft Office: Could you just as easily use Google Drive? Do you use an invoicing platform that’s costing too much?
When you first purchased the platform, you may have gone straight off a recommendation or been looking for the fastest, easiest solution. Now that your priority is to increase profits, shop around. See if you can find something that works better within your budget without sacrificing efficiency.
Energy inefficiency
Energy inefficient appliances and habits can really add up! Incandescent light bulbs are a thing of the past – fluorescent lights and LED lights use less wattage and last much longer. Additionally, ensure you and your staff are turning off computers and other electronics when they’re not being used. This will help you save a lot of money on electricity bills over time.
Subscriptions
You might subscribe to business-relevant publications or online courses, but how often do you make use of those subscriptions? Review your expenses to spot any lingering subscriptions that are eating into your monthly profits. Cut them out once and for all, and be careful about signing up for future subscriptions!
Conferences and Trade Shows
Although conferences and trade shows can increase your knowledge, help you network, and generate new business, they’re not absolute necessities. Consider cutting back on your annual conferences or trade shows if they haven’t been generating returns on your investment until you’ve increased your revenue enough to justify the expense (and can confirm that it fits!).
2. Upsell Your Current Clients or Customers
It’s far less expensive to sell to existing clients or customers than it is to onboard new ones. Do you have any new products or service offerings your existing clients may not know about? Let them know before you spend a lot of time or money on marketing to new prospects. Plus, there are major benefits to upselling or cross-selling existing relationships.
Your existing clients already know and trust you, so if you have a new offer, they may be eager to take advantage of it. And letting them know about your new offerings – especially those that can solve their problems – increases their loyalty. You might even bring about free marketing in the form of referrals when your loyal clients start telling their friends and family about you.
3. Increase Pricing When Appropriate
It may feel uncomfortable, but every business owner will need to increase their prices at some point or another, and likely on a consistent basis as time goes on and your business grows. If it’s been a year or more since you’ve increased your prices, consider how doing so might increase your business profits.
Everyone is reckoning with rising inflation right now. So if your expenses are rising but you haven’t increased your prices, that’s bad news for business. You should increase your prices appropriately to at least account for inflating overhead costs and variable expenses. Additionally, increasing your prices may attract higher-quality clients or customers. If you offer bottom-of-the-barrel pricing, you’re inevitably going to attract bottom-of-the-barrel leads.
When increasing prices, it’s more important to pay attention to profit margin than a simple dollar increase. With the right pricing strategy behind you, you can actually increase your profits even if your revenue decreases. This can result in a profit increase while saving you valuable time, which is a win-win, in my opinion!
For example, even if a price increase initially lowers your sales volume slightly because clients don’t want to pay your new rates, you likely won’t lose customers who truly value what you offer. The profitability in the clients who stay will make up for the clients who leave. Plus, you’ll have more time to provide better service to those existing clients and attract better clients who are willing to pay you what you’re worth.
Increase Profits In Your Business With Help From Financial Fitness Coaching
At Financial Fitness Coaching, we help small business owners take control of their cash flow and maximize their profits. You work hard in your business, and you deserve to live a financially stress-free life. We can help you achieve the ideal you’re looking for.
To see how I can help you and your business, email me at kristen@financialfitnesscoaching.com or simply schedule a free 20-minute Discovery Call on my calendar below!