Make your business more profitable
Profits are vital to your business as they fuel growth. They
lead to sustainable cash flows and without them a business will
fail. This guide will give you a better understanding of why it is
important to have healthy profits and how you can increase them
without affecting the quality of your service and products. By the
end of the guide you should know:
- Why you need to drive profit
- Where you are making a profit
- Control and cut costs
Why you need to drive profit
Having sustainable profits in your business increases its value.
If you have a poor profit level this will hamper your
attempts to put money back into your business and keep it growing.
This means less investment in new products, new plant/machinery,
new technology and new staff. It will also be harder to attract
finance into the business from outside sources. To begin with you
need reliable and accurate management accounts to determine your
- Find out how much your business is in profit
- Assess where your business can become more efficient - sales,
Where you are making a profit
Find out which parts of your business are bringing in good
profits and which are not. Which of your customers bring in the
most value to your business? You can then focus on your most
profitable clients and look at how you can expand the services and
products you sell to them through diversification or cross-selling.
Look at your competitors and ask whether your product is fully
competitive and if your service is of the highest quality in the
Review your pricing structure and ask whether you are charging as
much as you could be for your products.
- Look at the profitability of each of your sales
- Produce profit and loss accounts for monthly management
Control and costs
You need to uncover the waste in your business and closely
manage your costs. Look at making savings with the type and
number of suppliers you use and whether you can buy cheaper raw
materials. Look to reduce costs in these areas by 5% every year.
You also need to limit and reduce overheads and your tax
liabilities where possible. More efficiencies can be gained in how
you use your premises - get lower rents for longer contracts,
sublet unused space - and what you pay to power suppliers. But do
not let your cost-cutting come at the expense of driving down the
quality of your products and services.
- Review where and how you use suppliers
- Buy your supplies more effectively
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