All businesses want to increase their profits, but very few are able to. In fact, 90% of all startups fail within the first five years of operations. While there are many reasons for why this happens, low profits is usually the most common cause.
The problem is that you cannot directly increase profits. You cannot wake up and say, I’m going to increase my business’s profits today.
It can only be done in an indirect manner, by first coming up with a strategy. For example, you can create a channel sales strategy or come up with ways to reduce expenses.
Nonetheless, let’s have a look some ways to improve the bottom line:
- Increase Sales
This is not as easy as it sounds on paper. Making a successful sale is very hard. You first have to generate leads and then you have to convert leads. However, with average conversion rate being as low as 2.35%, increasing sales can be a pain.
For this purpose, businesses have to come up with a better sales strategy. Remember that it is not a single person’s job. You need to create a sales funnel that consists of different processes to be able to secure a new customer.
Moreover, make a good use of technology. Many businesses have been able to increase their conversion rate by using CRM software and other such tools. You can also have a look at how tech can help you make more sales.
Also, make sure not to neglect old customers while trying to win new customers as it costs five times more to acquire a customer than it costs to retain a customer.
- Increase Profit Margins
This is not the most preferred way to increase profits, but it can work if you have a good market standing or if you have a loyal customer base.
Profit margins can be increased in two ways:
- By increasing the price of the product.
- By decreasing the cost of production.
While companies should try to work on reducing the cost of production, it is again a very difficult process. This is why most companies usually prefer to increase the price.
Every dollar you increase, while holding costs constant, is your additional profit. However, this can backfire as you may lose buyers when you raise prices.
Buyers are always on a lookout for cheaper alternatives. Raising prices may cause you to have decreased sales so make sure to do the maths before you take this step.
- Get Rid Of Useless Expenses
Have a look at your business’s cash flows and try to get rid of all additional expenses. For example, if you have a big office, you can move to a smaller space and save on rent. Similarly, you can get do away with employees that are not profitable for the business.
Even the smallest of expense can make a difference.
Just follow these tips and watch your business make more profits.