12 Profit Improvement Ideas

Here are 12 profit improvement ideas for your business from Andy Hanselman.

1. Choose ‘em Or Lose ‘em!

First of all, do you actually know where your profits come from? I don’t just mean, what’s left at the end of the month when you do all the ‘sums’, but who, how and what drives the profitability of your business? It’s a simple question, but according to a report I read from a well-known firm of accountants, half of UK businesses can’t accurately determine their profitable customers and products. Now, that’s a bit scary!

Identify which of your products, services and customers actually are profitable. Focus on the ones that are, eliminate or alter those that aren’t.

2. Reduce Costs

Most businesses today are running a ‘tight ship’, and I’m not suggesting that you can easily cut costs, but are you getting the best from your suppliers? Why not ask them this simple question ‘how can you add value to my business?’ and see what happens. If not much, then maybe you should look elsewhere.

3. Improve Efficiency And Effectiveness

What are the ‘blockages’ in your business that create waste in time, resources and money? Ask your people – what do they think? It might be you – are there things that you’re doing that someone else could do (better).

4. Reduce The ‘Cost Of Waste’

Identify the things that ‘go wrong’ in your business and work out how often it happens and what that’s costing you per year in terms of time, resource and money – it’s called the Cost Of Waste and it’s a great way of ‘amplifying the pain’ – now work out what you need to do to fix it.

5. Put Up Your Prices

Not necessarily all of them, but are there certain products or services that you could charge more for and shouldcharge more for?

Not every customer focuses solely on price. Do you know which of your customers look at value, not just price? Establish a proactive pricing policy and ensure everyone knows what it is. When was the last time your prices went up? Have your suppliers prices gone up and you’ve absorbed the difference? I know it’s not easy to randomly increase all your prices, but are there certain products or services where opportunities exist? Are there some customers that should be paying more for what you provide?

6. Give Less!

No, I don’t mean do ‘half a job’, but are there certain things that you provide that your customers don’t value? Things that are costing you time, money and effort for no real return? Perhaps you could stop providing them – they could be costing you!

7. Charge For It

Alternatively, would some customers pay for these ‘extras’? Could you/should you charge for them?

8. Sell Up!

Are there additional ‘extras’/ upgrades / ‘better or bigger’ offers that you could provide that customers are interested in? That’s ‘selling up’. By the way, this is NOT about ‘heavy selling’ and forcing people to buy things they don’t want! Ensure that your customers are offered the ‘best value’ that means ‘best value’ to you! Would some be happy to spend more with you for an upgraded or superior offer?

9. Sell On!

Think ‘share of customers’.  Are you maximising opportunities with your existing customers? When do they buy from you and when do they buy from your competitors? Do they have a full understanding of what you do/offer? What do you need to do to educate them? It’s about proactively Identifying and creating opportunities to get your existing customers to spend more.

10. Make Sure You’re Getting Enough!

This is all about selling to new customers. Get proactive in generating the sort of customers you want to work with.

11. Create A Profit Focus And Set Profit Targets

Involve everyone and use these to drive performance.

12. Don’t Just Stand There, Do Something!

Winners take ACTION not notes! What will you do to improve the profitability of your business?

And finally, it’s worth pointing out, in the words of Henry Ford… “A business that makes nothing but money is a poor business.” It’s true – but you do need to make some.