Business owners are mostly concerned about cost reduction and profit maximization. In order to increase profits, one must be diligent enough in cutting excess costs.
The author of “Six steps to creating profits” stated that nearly two-third of small businesses don’t make profit or they fail to increase their profits from the year before. Therefore in this article, we will be exploring various strategies that could be used in cutting costs, increasing profits and improving your bottom lines;
1. Analyze And Adjust Operating Procedures
Looking at documents like balance sheet, one might find it difficult to understand some terms. However, understanding these terms is important. It would help you a lot in understanding your financial statements to be able to improve your business’ fiscal health
Operating costs (OC) is one of those terms and it is incredibly relevant to business owners. Also known as operational expenses, it is the costs attributed to producing goods and services. Therefore, the first step to reduce cost is to analyze where and how funds are been disbursed. This way, you would be able to track your efficiency and also determine whether to trim or completely stop any operating cost.
The biggest category of OC for almost all business owners is overhead. To reduce this and generate more income one should try to; embrace technology by automating and streamlining business functions, outsource certain business practices to a third party, look around for better rate, telecommute instead of spending too much on an office space.
2. Increase Staff Productivity
Like Shackleton said, “The personnel of an expedition…is a factor on which success depends to a very large extent”. Employees are everything to your business. When your employees are happy, they accomplish more quality work in a short period of time. They also go out of their way to ensure that the business is sustainable. Therefore, to maximize profits and reduce costs, consider using simple motivation techniques.
For example, reward the employee that increases his/her output or meets a target. Introduce fun activities like picnics, games. Send personal notes of congratulations or thank yous to employees at their homes. Training and skill advancement seminars are also good techniques that can be used in motivating your employees. Investing in that will not only make them happier, they would be inspired to work efficiently and remain loyal to your company.
3. Understand Your Customer’s Needs And Adjust Your Business Plan Accordingly
Understanding your customers – their needs, why they should come to you or why they are coming to you- is important in maximizing profits in your business. Also look into how best you can ease their problems compared to your competitors. Adjusting your business plan with this will make you better positioned for increased profits.
There are couple of ways to gain insights into what your customers might need from you; conducting focus groups, listening to your customers on social media or doing keyword search.
4. Raise Prices To Increase Profits
Evaluating the cost of your products/services by reviewing your cost structure is an important aspect of maximizing profits. When the cost of raw materials and other related costs increase, the additional costs should be included in the selling price. However, do this without driving away customers by adding to the perceived value. This way, customers will be willing to pay for your product or services regardless of the price.