There are only two ways to run your business more profitably: You can either increase your income or you can decrease your expenses. Either way will help to generate additional profit for you to spend on your business (or yourself).
But it’s easier said than done. In this day and age, in this competitive marketplace, profit margins are trimmed to razor thin pennies and expenses seem to be as lean as they can be, but also seem to be growing.
There are ways, though, to help you increase your income or decrease your expenses. But you need to be willing to change your mindset. Are you ready for more profit? Let’s look at the ways:
Increase income
1. Set a target to shoot for. If you don’t plan, you won’t know if you’ve succeeded. Use some of the business plan templates on this site to help you create a step-by-step pathway to success.
2. Get rid of the low-paying customers. Not every business can do this (for example, Wal-mart isn’t about to shut its doors to people of a certain economic bracket) but if you are in a consulting or freelancing business, make it a habit to complete (and not renew) contracts of lower paying customers every time you find a higher paying customer. This way, your business income will trend upwards.
3. Raise your prices. Don’t compete on price. If you own a business in a highly competitive field, don’t compete, differentiate! Find something different and unusual about your product or service and promote it … and raise your price.
4. Sell more. This seems obvious, but so many businesses could do a better job: are you offering ancillary products and upselling opportunities every step of the sales process?
5. Sell to more people. We’ve talked in other articles about getting customers to refer other customers to you. That’s smart. Make sure you have the customer service infrastructure in place to keep your customers happy so that they will refer their peers to you.
Reduce expenses
1. Get rid of the excess. If you bought lots of bandwidth and filespace from you web host company but aren’t using it all, switch to a lower tier. You can always buy more when the time comes but entrepreneurs often buy more than they need because they are (understandably) over-optimistic about the flood of customers rushing to do business on their site.
2. If something takes too long to do, outsource it. The value of your time can better be spent somewhere else. You’ll actually reduce your expenses by spending money to get someone else to do it. (This expense-saver is easy to miss because few people consider the value of their time).
3. Don’t travel. If you own an online business, this may not be a big deal for you. But it can be for offline businesses and freelancers and consultants. Often they are invited to client’s offices for brainstorming sessions or initial consultations – these can be better accomplished over the phone and they save a lot of travel time and expense.
4. Look for the free version. There’s lots of good software out there to help run your business. But it costs money. Free software can often work just as well and there’s usually a free, robust version of most software out there. (Of course, software designers have to eat, too, so make sure you support them, once your business is running profitably, by buying the full version of the software you use most often).
