Top 45 Ways, Tricks, Steps & Tips to Increase Profitability
In the interest of full disclosure, if you’re expecting a list of 45 profitability suggestions, you won’t find one here. Sorry. But this is how the title of today’s blog came to be:
I wondered where a small business owner would start if he or she realized that profitability goals were not being reached. In a quiet moment, all alone, surrounded by numbers and words and piles of data that boil down to, “Your business is not profitable!”, one might turn to google for some initial guidance, just a little bit of direction on how to get started.
A simple search for “increase profitability of small business” led to a lot of list-based articles with a bunch of numbers. I chose 7 articles from the first page, which did not feel like an appropriately random sample, but 90% of people do not go beyond the first page of a google search (never has there been a better reason to focus on SEO!).
The 7 articles provided a total of 45 ways, tricks, steps, and tips for increasing profitability.
Every article had at least 2 suggestions related to customers, which totaled 15 customer-based suggestions, and that made me happy. One suggestion referred to uninvolved customers as “deadbeats”, and that made me unhappy. We all know that without customers, businesses cannot exist, so it makes sense for so many, overwhelmingly positive suggestions to address things like creating and maintaining a customer database, eliciting more customer referrals, and staying visible and accessible to current customers as well as prospective customers.
11 of the suggestions related to products and services. The overall, and rather simple suggestion was to focus on the products and services that are profitable while cutting out those that are not. The complicated reality is, well… more complicated. If a business has just introduced a product or service, there is a reasonable expectation that rolling out that new endeavor will cost more than it brings in, but only initially, and it shouldn’t be abandoned before being given enough time to prove its worth. Certain products and services may have seasonal popularity, but ignoring them during the down months may leave a business unprepared for the up months. The suggestion to focus on your profit maker is valid, but only when applied to a wealth of data regarding product and service performance.
10 suggestions addressed cutting costs. There were all the expected suggestions like reassessing and trimming operating costs, inventory management, and developing a relationship with suppliers that allows for negotiation of discounts. Only 3 articles addressed the harsh reality that weighs heavy on the hearts and minds of small business owners: eliminating unnecessary employees. One article took a different approach (one that we would take as well) and suggested a review of processes to ensure employees were being given the tools to be as effective and efficient as possible.
The remaining 9 suggestions dealt mostly with developing a sales team, increasing the size and number of transactions, and increasing add-on sales.
It’s worth taking note of two particular suggestions: Analyze Your Profit Margin and Take a Hard Look at Your Business Model. These are two things that every small business owner should be doing on a regular basis. You cannot wait until your business is struggling to understand your business. The challenge is being able to assess your business in an unbiased and unemotional way. It’s a nearly impossible thing to ask of a small business owner, which is where process improvement specialists, like us, come in. We understand what it means to have created something that you’re passionate about, and we know how terrifying it can be when everything you have is invested in a business that’s not performing as expected. We can walk you through your business from the ground up, helping you see things in ways you hadn’t considered before. We conduct in-depth data analysis to identify any flaws in your processes, then develop a plan to correct those flaws, followed by a trial run of that plan. After analyzing the success of the corrections, the “final” corrections are put into place. But when you truly love your business, the process is never done, and the corrections are never really final.
There is no simple answer to increasing profitability. Your business is unique and it deserves answers tailor-made for you. Your customers’ needs are always changing, the technology of marketing and reaching your customers is always changing, technology in general is always changing, and no one way of doing things will be successful forever. Numbered lists can provide you with some good ideas, but process improvement specialists can help you learn how to keep your business growing, while you keep growing with your business.