These days, companies are having a hard time to become profitable. This is because many of them are competing in a market, trying to lower the prices in order for the customers to patronize their products. As a business owner, you need to think of ways to maximize your profit without sacrificing the quality of the goods and services that you are offering and at the same time, be able to survive in a very competitive market.
Here are 7 #Tips to decrease costs and increase your profits, in any economic environment.
1. Offer a Great Product or Service
This is perhaps the most important element of business success. The product or service must be truly excellent. It must cause customers to say, upon using your product or service, that, “This is a great product!”
This is where the rubber meets the road. This is where your business intelligence most shows itself. This is where you demonstrate that you are on the high road to greater sales and profitability. It is when you can continually focus on making your product or service so attractive and helpful that people literally want to tear it out of your hands.
Fortunately, most products start off as average or below average. They are then improved over time, making them more and more attractive and desirable to more and more customers until people start to say, “This is a great product!” This is one of the most important strategies and skills that you learn in our book.
Top Sales Training and Personal Success Authority
2. Product Differentiation
Companies that can differentiate themselves by providing top-quality products or services often are able to command higher prices in the market. While price alone does not guarantee profit, it does give companies the opportunity to maximize profit. All else being equal, the higher the price that companies charge for their products’ or services’ superior quality, the more profit companies can expect. The differentiation strategy works only if companies have a target market in which customers are less price-sensitive, but more quality-conscious than customers of other markets.
3. Keep an Eye on Cash Flow
Today, manufacturing shops are having a tough time finding work, let alone receiving payment for their services. When a customer is extending their terms and not paying on time, they are negatively impacting your cash flow. When your company’s cash flow is negative, you will need to borrow from the bank and pay finance fees. Now is a good time to evaluate your current customers and see if some relationships might not be as profitable as you thought.
Sales Manager, Travers Tool
4. Review your Cost Structure
Make sure you have a sufficient markup on your goods. When the cost of raw materials and related costs increase, the additional costs need to be included in the selling price. Reviewing your cost structure on a regular basis will help you keep track of costs that are on the rise before the cost is too great to completely include in your selling price. For example, if the cost of a widget was $10 but now is $12, you can pass along a portion of the incremental cost to customers without affecting your profit. However, if you don’t increase the price to the consumer until the widget cost increases to $50, you are bound to lose customers due to your skyrocketing prices.
5. Analyse your Profit Margins
Your overall gross profit margin could be deceiving. Find out the gross profit margin on each of your products and services, and, in addition, analyse your gross margins over different business divisions, product categories, suppliers or customer categories according to your business. This way you can identify both low margin or loss-making items and profitable activities or products. Then you can stop selling low margin lines and focus on the ones that work.
Founder of Accountancy + Business Advice Centre
6. Offer Special Discounts
Discounts, properly marketed, create a special buying opportunity in consumers’ minds, often spurring them to take action. The discounts can be applied to limited products, such as a single manufacturer’s brand, a limited category like school supplies, or all products in a store-wide sale.
In fact, you can create a sale environment for almost any reason:
• Quantity Discount: When two or more of the same product are purchased at the same time
• Tie-In Discount (“Bundling”): When two or more different products are purchased at the same time
• Seasonal Discount: When products are bought within a specific time-frame
• Conditional Discount: When the products purchased are used or reconditioned
• Stripped Discount: When the products purchased are “stripped” of one or more features
7. Stay visible and connected
Accreditations, licenses, and certifications — for your business or for individual employees — can set you apart from your competition. Take your reputation online, using social media, your website, and a blog to connect with clients and make strategic alliances. Use ad sharing with complementary businesses, and take advantage of affiliated marketing online tools to drive new customers to your site. Eliminate stale, ineffective alliances that may be dragging you down.
If you’re a business owner who wants to focus on growing your business and leave day to day operations to a virtual assistant, I’d like to invite you to take the next step with a FREE “Strategy Call” with UK-based outsourcing expert, Yeukai Kajidori.