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Profit improvement strategies

Profit Crop

How to improve profit 

Decreasing profits in a growing business is a common problem for many businesses. The very fact that you make less money as your business grows can be disheartening. While you may experience a boost in sales and the number of staff, profits seem to decline in comparison.

A number of combined factors lead to profitability. However, there are really only 3 things you can do to increase profits, which are one or a combination of:

• Increase sales

• Increase prices

• Reduce costs

Tap of money crop

Profit improvement strategy

A profit improvement strategy can increase profits. It is important to implement a strategy rather than simply have an understanding of how your business should increase its profitability.

The biggest problem occurs when business owners fail to think strategically once their business gains momentum. Increased sales often give the false impression of greater profits while you begin to get more involved in daily tasks rather than think strategically. In some instances, you may end up launching a product and only realise that it isn’t generating sufficient profits months or years later through an analysis.

This is clearly an indication of the lack of strategic planning, which is the only way to ensure maximum profitability. The key is to evaluate profitability of your product in every stage beginning from the concept stage to the launch stage, followed by periodic evaluations.

Increasing sales is not a quick fix solution for a product or a service that isn’t performing well. The crucial element is profitability. An entire team can be frustrated when their time, energy and resources on a product have not led to greater profitability. It is important to understand that poor profitability often leads to a depleted cash flow even though the two are not to be confused. In some cases, an increase in prices can alleviate the problem but most business owners then begin to worry about their sales volume taking a hit, which further exacerbates the problem.

When there is a lack of resources the problem is further compounded by tighter marketing budgets, the inability to incentivise staff, and a failure to find cost effective suppliers. The only solution is to plan well in advance for profit improvement and make sure you stick to the plan.

new plant growing portrait

Profit improvement is an ongoing project

The best way to ensure profitability is to make profit improvement an ongoing project. To establish a system where you can achieve maximum profitability takes time.

Some profit improvement activities that can make your business more profitable are:

• Determine areas which are your biggest opportunities and identify ways to reduce less profitable activities

• Perform a comprehensive profitability analysis on specific data

• Design a system to ensure a reliable flow of information

• Analyse Key Performance Indicators

• Regular review of pricing arrangements with various suppliers and research alternative suppliers

• Conduct frequent customer surveys to gauge market trends

• Set realistic goals and communicate the same to all employees


Relaxed worker

Benefits of a profit improvement system 

Selling products or services without a complete understanding of their profitability can be a waste of time. Increasing sales or prices is often only  part of the approach. With proper profit improvement systems, it is easier for your business to increase profits and not just simply boast big turnover figures. If you want to know more about a profit improvement plan then get in touch with Apex Advisors.