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Expert Answers to Biz Questions
Listen in! Pick up some expert advice to a reader's question that we selected from CyberSchmooz.
What To Do to Improve Your Small Businesses’ Profits
Many small businesses, however, well they are run, struggle to maintain a stable cash flow and to find new ways of increasing their profits from time to time. However, to help your business to grow and to gain the capital that you need to reinvest into your business, finding a way to improve your small businesses’ profits is important.
- Decrease Your Expenditure
Decreasing their expenditure is the first thing that most businesses do when thinking about the best ways to increase their profits due to the ease of which you are able to do this. There are multiple ways that you can decrease your expenditure, and these include options such as reviewing your supply chain to find the best deals for your business, ensuring that your stock reflects the demand, and making your processes more efficient to reduce the waste of energy and materials. However, for offices, you can decrease your expenditure easily by deciding to switch your energy supplier. Utility Bidder can help with this by allowing you to compare commercial electricity prices for your business to find the best package and deal for according to your usage.
- Review Profit Margins
It is also important that you review the profit margins of your business to make sure that these are not hindering your performance. Although raising your prices can deter new customers, if you believe that you must raise the prices of your products to compete with the competition, you should offer incentives of free additional services alongside these raised prices. You can also increase your profit margins through upselling to your customers, as this encourages established customers to buy more of your products free from the concerns of finding new customers.
- Prioritize Your Cash Flow
You can improve the cash flow of your business by sending invoices on time and ensuring that this money is returned to you in the time stated on the contract. If it is not, you should follow this up immediately. You can also maximize the cash flow to your business through methods such as allowing customers to pre-order products or creating pre-order incentives. This will, for instance, increase the number of sales that you will immediately receive on the opening day of a product or service’s launch. You can also increase cash flow by offering subscription services or payment plans to customers as this will enable you to have a steady and assured flow of cash every month.
- Invest in Your Business
You need to invest in your business in order to get higher profits, and customers often look for businesses which are constantly growing, such as being renovated and updated to match modern sensibilities and technology. Not only this, but investing in your business by providing new products and services is also a great way to increase sales and customer numbers by broadening your expertise.
- Consider the 80/20 Rule
In most businesses, 20% of your customer base brings in 80% of your revenue, and it is important to focus on these major clientele to bring in higher profits. Once you have determined the demographics of these customers, then you will be able to focus your incentives and targeted marketing on them rather than on customers who are likely to add only a small profit to your business.
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