As a business owner, you probably dream of looking at balance sheets that boast soaring profits on a daily basis. The trouble is that it’s very difficult to reach a stage when your business is in the black, let alone providing you with a generous income. The statistics for business survival, especially among new companies, don’t make for pleasant reading, and this is why it’s so important to understand how to create a profitable company. If you’re new to business or you’re plodding along at a steady rate, and you’re hoping to elevate your firm to the next level, here are some tips to help you convert marginal profits into maximal gains.
Controlling the bottom line
Making money in business isn’t just about ensuring that products are flying off the shelves or orders are flooding in. It’s so beneficial to focus on sales, but that shouldn’t take away from controlling your bottom line. If you’re making a huge amount of money, but you’re not actually creeping out of the red, this probably means that you’re spending far too much. You need to find the right balance between spending and earning. There are myriad ways in which you can save money when you manage a business. The steps you take will depend on the type of company you own, but you may find some of these methods effective.
Buying and hiring equipment
Most businesses use technology and equipment of some kind. If you’re investing in new equipment or you’re considering buying a new machine or a revamped computer system, mull over your options first. If you’re shelling out for new equipment all the time, this is going to be costly. Evaluate the cost in terms of how much you’re going to spend each time you use it. If you need equipment for a single project, and it’s unlikely that you’ll use that specific machine or tool again, it’s likely that buying won’t make sense. Look into the cost of hiring equipment or search for an auction inventory and see if what you need is available at a discounted price. Sometimes, buying can make sense, for example, when you plan to use the same technology over and over again, but there may still be alternatives open to you. Instead of buying shiny new gadgets or gizmos every time, look out for cheaper options such as nearly new or secondhand items. The savings you make could really add up over a period of time, especially if you use different types of equipment for different projects. If you do buy, and you stop using the machinery or technology you’ve purchased, consider selling as means of boosting your bank balance.
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Saving on staffing and outsourcing
Does the bulk of your income go on wages? Do you feel like you have too many employees for the workload or do you own a seasonal business? As the manager of a company, it’s essential to ensure that your staffing structure works on both a practical and financial level. You need to make sure you’ve got enough hands to the pumps, but you also need to balance the books. If you’ve got people sat around with nothing to do or you’re spending a fortune on hiring people on long-term contracts for short-term jobs, it may be time to reassess the way you work.
If you require people with specific skills to complete a project or improve the efficiency of the business, it’s beneficial to consider your options before placing an advert for a permanent position. If you don’t need that person all year-round or you’re undertaking a job for 6 weeks or 6 months, think about offering a short-term or temporary contract or outsourcing specific tasks. If you don’t have an IT team, for example, but you’d like to invest in IT support, you don’t have to recruit a whole host of new employees. Instead, you could outsource this area of the business. You pay an agency a monthly or annual fee, and in return, you have access to the skills you need. If you have a seasonal business and you need more workers at certain times of the year, start advertising a few weeks before the peak period and offer contracts on a temporary business. You’ll often see shops and stores advertising for staff over the holidays, for example. Streamlining your staffing structure can help to reduce running costs significantly.
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Negotiating with suppliers
If you’ve been working with the same suppliers for a long period of time, it’s worth trying to negotiate better deals or looking elsewhere to see if you could take advantage of lower rates. Competition can lead to reduced prices and more attractive incentives for new customers, so don’t assume that you’re getting the best price just because you’ve been loyal to the same companies. It’s always worth asking the question. Even small savings could have a significant impact over the course of a month or a year.
Reducing expenses
If you’re trying to run a more cost-effective business, it’s a good idea to take a look at the books and see where you’re spending money. Every business will incur expenses, but there may be areas in which you could save. Consider the example of staff travel. If you’re paying for employees to fly to different states or countries for meetings, you’re forking out for plane tickets, hotels and living costs that individual will incur while they’re away. The cost of a single business trip could amount to hundreds, even thousands of dollars. Sometimes, face to face meetings may be essential, but is every single trip necessary? What if you could replace some trips with video calls and conferences? By doing this, people can interact with each other without wasting time or money on travel. Another option you may wish to explore is setting a budget for staff expenses. For example, putting a cap of $50, $100 or $150 on a hotel stay.
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Driving sales and increasing your income
Once you’ve established how you can cut the cost of running your company, you can boost your profits further by driving sales and bringing more money in. There are multiple ways of doing this, and you can adapt your strategy to suit your business and your target market. Some examples include:
Improving your marketing campaign
Marketing is all about raising awareness of what you do and who you are. Without marketing, your reach is limited, and people may not be aware that you exist. If you’re not getting enough hits on your website or there’s a lack of customers coming through the door, it’s time to revamp your strategy and make it more effective. Do some research to ascertain which methods of marketing are most influential in the marketplace and talk to customers. Explore different methods and tailor your campaign to your target market. If you’re trying to sell clothes to people aged between 18 and 35, for example, social media marketing is an excellent platform. If you can get your name out there, there’s scope for your business to thrive. Set up social media accounts, encourage followers to share your post and make sure it’s easy for customers to find out more or place an order by following links from the posts they like.
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Learning to compete
If you’re trying to maximize your profits, you’ll find it hard to do so if your rivals are leaving you in their wake. If you’ve lost customers or potential clients seem to be swayed by competitors, take a good look at what they’re doing and what they’re offering that is more attractive. Once you have an understanding of the market, you can act to ensure that you become the best bet. Work on developing your USP and make sure that it’s strong enough to set you apart. What can you do to ensure that new customers choose you and existing clients stay with you? You may want to evaluate your pricing strategy or work on incentives that will appeal to the kind of customer you’d like to attract. Could you offer a discount for multiple purchases or a voucher for money off your next order? Are you able to provide free delivery or a next-day service? Is there a reward available for recommending your business to a friend?
Running promotions
Promotions are a great way to drum up interest and boost sales. Flash sales, competitions and deals like buy one, get one free can help to make people aware of your business and encourage them to stick with you in the future. If you planning an event or you’ve got ideas for a promotion, make sure you shout it from the rooftops. Create and share posts on social media and include details of the discounts available on your website.
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If you’re hoping to maximize your margins and send your profits soaring, it’s wise to take a look at both how much you spend and how much you earn. If you can reduce the operating costs and drive sales, this will stand you in good stead to turn your fortunes around.
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