Let's break down 4 ways you can improve the profitability of your business.
1. Increasing the value of transactions. Perhaps somewhat obvious, but if you charge clients more for a produt or service, this can potentially increase your profitability. However, this should be approached carefully, as price sensitivity can lead to an overall drop in the number of transactions.
2. Increasing the frequency of transactions. In other words, selling more things or billing more time. For instance this can be achieved by either attempting to attract new clients through for instance advertising and social media, or attempting to sell your existing clients more services
3. Reducing your costs of sales. In the case of products, this could be for instance trying to source your goods from a different supplier to reduce costs, or attempting to seek discounts from your current suppliers through methods such as prompt payment discounting. If you provide professional services, this is less of an issue if you're a small business, as the majority of this relates to your own time.
4. Reducing your overheads. It's easy to under-estimate the effectiveness of this. Think of your overheads like a hil you have to climb each month. Once you've crested the top you're making profit, but up to this point you're battling to just keep the business going. The bigger the overheads the more you have to climb, and the less scope for profits. Keeping a business as lean as possible can be a great way to maximise your profitability, and reduce the stress of soaring sales targets.
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