11 simple ways to boost your profit levels
Barely a day goes by without business scrutiny of a government policy decision that directly or indirectly impacts them.
Just this week we’ve seen employers push for the slaying of the “sacred cow” weekend penalty rates for staff and businesses fume at the rather regressive idea that Australia should have to cut its commitment to research and development in order to fund a potential company tax cut.
With figures out this week that show trading conditions are wallowing at a three-year low, it’s understandable why businesses should fret over the cost of regulatory compliance.
However, it’s important to not overlook the many things that entrepreneurs can do within their businesses to improve their fortunes.
Many firms, it seems, could do more in key areas such as online sales – as a recent report highlights – and pricing, with our recent analysis showing that around 75% of Australian businesses are using outdated, crude methods that do little to improve margins.
Greg Charlwood, managing director of Bibby Financial Services Australia, says that rising business bankruptcies – official stats show a record 1,123 companies were placed into receivership in February 2012 – should place a greater focus on boosting profitability.
“Running your own business is one of the most exciting, challenging and rewarding
things that you can ever do and requires motivation, entrepreneurial flair, determination and creativity,” he says.
“In order to be successful, it is vital that you know how much your product or service is worth and manage the fine balancing act between charging your customers the right prices and making enough profits to meet your revenue and profit targets,”
So how can you fatten up skinny profits without hoping for outside intervention?
Bibby has put together 11 top tips on how to push yourself further into the black.
1. Reduce operating costs
Look at where your business spends its money in producing its product or service, e.g. travel costs and stationery.
Set up regular cost-reduction forums and consult with your staff on ideas. Are there any areas that can be cut back without having a negative effect on profits?
2. Review your supplier base
Is the business paying for external suppliers to provide a service that could be carried out more cost effectively internally?
Can you consolidate your suppliers?
3. Reduce cost of financing
Consider ways to improve cash flow to reduce your cost of financing, since the longer debt remains outstanding, the longer it has to be financed through overdrafts or other mechanisms.
Consider using debtor finance to reduce your accounts receivable cost and cost of finance.
4. Learn to negotiate
Talk to your key suppliers and ask about early settlement discounts or loyalty
According to our recent Bibby Barometer Small Business Survey, 45% of businesses surveyed offered this facility to customers with a discount in the range of 3-6% the most common.
If you don’t ask, you don’t get.
5. Shop around
Research your supplier’s competitors and find out what prices they charge and what discounts they are prepared to offer.
6. Buy in bulk
Consider buying raw materials and supplies in bulk at a cheaper price per unit.
Where possible, consider pooling resources or join a bulk-buying group with any other business owners to get even better discounts.
7. Diversify your product range
Try to sell new lines to existing customers as well as attracting new ones by adding to your product range.
Trim your range of non-profitable products to focus all your energies on the profitable ones.
8. Minimise the risk of bad debts
Bad debts erode hard-earned profits very quickly, so it’s important to safeguard your business. Consider a reputable business debt recovery agency to work on any delinquent debts to give you piece of mind.
9. Know your worth
Are you charging enough for your products or services? Review your pricing to ensure that you are keeping up with inflation and your competitors.
Build value in the minds of your customers through marketing and promotional activity, and show other ways of using your product or how it will directly benefit the bottom lines of their clients or their businesses.
10. Work smarter
Investigate whether marketing or promotional funds can go further. Track the return you are getting on your activities.
Are there complementary firms or organisations that you could pool marketing spend or resources with?
11. Consider sales incentives
Look at ways to incentivise staff or customers who exceed sales
targets or introduce new customers.
Often internal sources will be the most cost-effective channels for new business.