In last month’s blog, I discussed how important it is for commercial organisations to make a profit and I included a few tips as to how this might be achieved.
Making a profit is clearly essential if a business is to survive; being able to increase profits is another important goal.
In a nutshell, I believe that increased profits can be achieved by thinking laterally, not being afraid to adopt and adapt the ideas of others, and by continuing to embrace change.
In my book, Your Bigger Future, I give a couple of examples of where this has worked. The first is from Henry Ford who, according to one of the coaches on a course I attended some 20 years’ ago, came up with the idea for an assembly line after watching a popular public pig slaughtering event! Other commentators say his inspiration came from a visit to a meat packaging plant where he noticed that by splitting tasks into individual components, productivity increased. Whatever the truth, the point is that he updated and applied ideas from others to his car factory to create the very first assembly line in the world.
Another example comes from a client of mine who told me he increased his profits by grouping clients from the same business together to deliver the service more efficiently. By adapting the way in which he worked, he was able to cut down on travel time and costs and in the process doubled his profits in a year!
Increasing profits does not mean increasing your prices to customers – in fact you should be very wary of doing this. As mentioned in last month’s blog, it is acceptable to increase your prices every year in line with inflation – otherwise you will slowly whittle away your profit. But your customers will quite rightly want to receive value for their money and there may be a price ceiling for your particular product or service.
Instead, you could think about the following options:
You could look at developing and launching additional products or services that are complementary to your core offer. For example, Brunsdon Employee Benefits Ltd was added to Brunsdon Financial Services Ltd a few years’ ago in order to provide added value to our existing wealth management clients, many of whom were business owners.
Remove the ‘dead wood’
If you have loss-making or unpopular products then at some point you must ask yourself why you are continuing to offer them. If not part of a wider pricing strategy, they should be deleted and replaced by profit making or more popular products.
Similar consideration must also be given to members of your team. If individuals are not productive in the sense of adding value to your business, then you may have to ‘let them go’. You must do all you can to help them to be productive, but if this fails then you may have to lose them – making sure you follow the correct procedures and with the involvement of your HR specialists.
Negotiate better deals from your suppliers
If you order frequently from the same suppliers, they will not want to lose your business. You should therefore be in a strong bargaining position to negotiate lower rates. Don’t be afraid to ask for a price reduction and / or perhaps a discount if you pay promptly.
Ask your customers for feedback to improve your offering
Satisfied customers keep coming back and will recommend you to others. It’s therefore in your interest to ask customers how they feel about the product or service you’re providing and how you can improve. Don’t be afraid to ask for honest feedback and adopt any changes that will improve your service offer.
Generate new leads
It’s easier to retain existing customers than it is to find new ones, so it’s important that you keep your customers happy. Having said that, businesses also need to find new markets for their products or services. Networking offers a good opportunity to drum up new leads – although this is difficult in the current times. Consider also asking your existing customers to recommend you to one of their business associates or to write a review for you on an online platform such as Google.
I hope you find these tips helpful. Next month, I’ll be focusing on my 7th tip for Healthy Business Finances, ‘Make the business attractive and saleable’. In the meantime, you can read the complete chapter free of charge here.