Profit is how we keep score in business. Just because you can pencil profit into the financial section of your business plan doesn't mean it automatically will happen. As an entrepreneur, you have to commit fully to "minding your own business" to generate the profits that you seek. Here are several strategies I encourage you to follow as you look to make your small business more profitable.
Focus on Profitable Resources
To operate a profitable small business, you have to constantly evaluate the productivity gains from people and resources. I don't hire someone without knowing the potential return on investment for my business. You can't afford waste with a small company. Before buying equipment, inventory, or supplies, consider the direct or indirect impact the investment has on your bottom line.
Use Monthly Sales Goals
Putting pen to paper and analyzing profit potential doesn't take a lot of painstaking effort. However, putting hands to dirt to execute your weekly and monthly sales goals is an exercise that you want to start early.
It is rare to find profits without hard work. If you always focus on monthly sales goals then you will focus on weekly sales objectives. By doing this on a regular basis you will always stay focused on marketing. Too often business owners focus on the job at hand and don’t fill their pipeline.
Always Look for Efficiency Gains
The key to maximizing profit potential in a small business is to always look for efficiency gains. Look for ways to save $100 per month. Check your fees that are deducted monthly from your business account. Are you using that club membership? website app? or email marketing program? Reduce banking fees and consider leasing equipment to improve profitability. Use a bit of humility to do what is necessary to reduce costs. Profitable small-business owners often change light bulbs, do routine plumbing, clean and perform other laborious tasks. Hiring someone to do these things is naturally more expensive. Efficiency isn't just about cost reduction, find ways to get the same or greater value with a lower investment.
The key to optimizing your profits lies in your ability to increase your revenue at a higher ratio than your costs. In the short term, you need to generate the maximum value from each customer and upsell them additional products and services to get more business. By focusing on your customer experience that will lead to word of mouth referrals and repeat business. It’s much cheaper to keep a loyalty than to go out and secure a new one. You also want to have a lead magnet and sales funnels to attracting new customers as an additional growth strategy as well.
Evaluate your pricing strategies to enhance profits. Make sure you evaluate all your hard and soft costs in your pricing model. Don't undersell your products and services to drive a high-volume. Precise pricing attracts the right buyers who are willing to pay for quality. Regular discounting establishes a price orientation with buyers and minimizes gross margin.
The path to profitability includes an emphasis on optimizing revenue and reducing costs. Eliminating waste and controlling costs are important as well. Profitable small-business owners create business strategies that are driven by sales.
Melinda is a founder and president of Quintessence Group, an award-winning marketing consulting firm based in Philadelphia, PA, serving Fortune 500 brands who target small businesses.