We are on our third category – PROFITS!
Here is the definition from the dictionary:
1. a financial gain, especially the difference between the amount earned and the amount spent in buying, operating, or producing something.
You are all in business to produce a PROFIT, right? Well, what does that actually mean? Does it mean increased revenue, more sales, lower expenses? It can…but basically, it means what is the number of what you KEEP on an ongoing basis? Sometimes, increased revenue can actually reduce profits, at least for a time. There is always a cost in acquiring new business. Do you know what your costs are? What about inventory, if you have one? Costs of materials? For most companies, their largest cost is LABOR (back to your People!). All of these are factors.
If you are looking to increase your profitability, it is imperative you sit down with a good accountant or other professional who specializes in this. Many times your CPA or accountant are good at tracking numbers and filing your applicable tax returns, but not so much in helping you determine where your money is going and how to increase your profits.
Here are some solid ideas of how to get that revenue up, without too much in additional costs:
1) Create a stream of recurring revenue. If there is a service or product you offer, can you create a way for automating orders? This is usually a very inexpensive way to create more profits. If you provide a service, can you put your customers on a regular contract basis for a fee? Think about your business and all the aspects-if there is something you can simplify and create more ongoing revenue, do it!
2) Do you have something you can offer online that is educational and provides value for your prospective clients or customers? Most savvy customers are looking at Google and other review to find services. Leading them to your website with an inexpensive, or even free educational piece will drive more traffic.
3) Reviews! Get reviews from your current customers and be sure to thank them regularly. They are your best source of referrals and bringing in new business, without additional expense on your part.
4) Increase your prices on an annual basis! This is probably one of the hardest things for a business owner to wrap their heads around. They are generally afraid to increase prices for fear of losing good customers. If anything, the caliber of your customer base will increase, because the people who stay (most of them will!) are your best customers anyway. Before increasing your prices, you can presell your product or service by a designated time period. This way, they have an option to buy more before the increase.
5) Inventory – only keep on hand what you need within a short period of time. You want to keep that inventory turning over. If something isn’t selling, do a special sale and get it out of your operation.
6) Where applicable, take discounts from your suppliers. Take advantage of any other discounts on services or product that may be available to you.
7) Prevent theft! No one likes to think of trusted employees walking out with some of your inventory, but it happens. Also, be sure you have checks and balances on your accounting. If you have an internal or external bookkeeper, be sure there is oversight on all transactions by your CPA or accountant. I have had two clients that I know of experience embezzlement at the hands of “trusted employees”. On that vein, be sure your business insurance includes an adequate amount for reimbursement if this does happen.
8) Streamline your operations – we discussed this in our first blog on PROCESSES. The more efficient and effective your processes are, the more your profits will increase.
9) Review all insurance policies on an annual basis- whether it’s liability or commercial insurance, employee benefits or Worker’s Comp- review all with an independent insurance broker. You may have had XXX company for years, but there are great companies who may specialize in your industry or have discounts you don’t know about.
10) Upsell your current customers – is there another service or product you can offer to current customers? Be creative and think “outside the box”. It doesn’t have to be a high end offering, just something that will create new revenue stream and provide value to your customer or client.
11) Inspire your staff to work more profitably – I have suggested to several clients that instead of offering a 401(k) plan, offer a Profit Sharing plan instead. It has several benefits to you; there is no mandatory contribution from the employer-you can declare a contribution annually AND the concept gives employees a vested interest in making sure profits are as high as possible without giving them any ownership in your company.
12) Identify and eliminate waste:
D – Defects (defective products due to issues like quality control, poor handling, etc.)
O – Overproduction (ordering or making more merchandise than necessary)
W – Waiting (unplanned downtime, absences, unbalanced workloads, etc.)
N – Not utilizing talent (not fully leveraging the skills or potential of your team, having employees do the wrong tasks, etc.)
T – Transportation (unnecessary movements of products — e.g., unnecessary shipping, inefficient movement from one store to the next)
I – Inventory excess (surplus or dead stock sitting in your backroom)
M – Motion waste (unnecessary movements of people — e.g., inefficient store layout)
E – Excess processing (having to process, return, or repair products that don’t meet the customer’s needs)
You don’t always have to make drastic changes in your business to significantly improve your bottom line. As this post has shown, sometimes a simple tweak in your pricing or a phone call to your vendor can pave the way for wider margins.
Can you think of other tactics that can help retailers improve their profit margins? Let us know by commenting on our website at www.sandbrookgroup.com. We’ll be offering a gift card for the top three suggestions!
We would love to hear back from you on how you attract and keep your employees! Please share your stories with us by going here. We will picking the top three stories and will be interviewing the winners online so that we can share their stories on social media. So don’t delay.
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