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5 strategies to increase your business profits

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Increasing your profits has obvious benefits. One of them is that profitable businesses are more resilient to changes in the marketplace. Healthy profits give your business a cash cushion to use when challenges arise, like a drop in sales. Higher profits also mean more flexibility when it comes to keeping prices competitive during tough times.

And in good times and bad, you can always use more profits to invest in marketing and promotions to bring in new customers.

So how do you increase your profits? Here are 5 easy-to-implement strategies for adding more money to your bottom line.


1. Increase your sales leads

Anything you can do to get in front of new customers is a welcome tactic. It could mean doing more of something that already works well in your business or trying something new.

Focus on activities that will help your business build a bigger pipeline of prospective customers. Try these:

Ensure your website is set up to capture new leads by offering valuable content, an exclusive event, or a free trial offer. 

Run online ads to drive traffic to your website.

Attend industry events and conferences frequented by your customers.

Expand your social media presence to include additional platforms such as YouTube and Instagram.

Be sure to measure your results so you can repeat top performing activities.


2. Convert more of your leads into customers

Your conversion rate is the number of your leads divided by your confirmed sales. For example, if you have 1000 leads, and you sell a product or service to 75 customers, your conversion rate is 7.5%. Once you’re successfully generating more sales leads, try to improve your conversion rate to increase profits. Here are some ideas:

Train employees on selling techniques and closing methods to help them convert more prospects into customers. Plus, incentivize them to close more sales with bonuses or contests.

Add a live chat feature on your website to answer buyer questions.

Invite your leads to attend a webinar with an expert topic and do a demonstration of your product features and benefits.

Create hard-to-resist offers to encourage customers to buy.


3. Increase the number of items sold to each customer

Adding volume to each sale is a tried-and-true method to increase sales and profit.

Entice your customers to buy just one more item, or hour, or service from your business. Try these tactics:

Add impulse or lower-price products at checkout (in-store and online).

Ask customers what else they would be interested in buying from you and then widen your product range to meet their needs.

Bundle products or services together to boost purchase volume.

If you sell a product, add a service (like an extended warranty). If you sell a service, add a product (like fitness gyms that sell branded merchandise).


4. Sell more high-margin items

Margin is the difference between your selling price and the cost of goods sold. Certain items in your inventory may have a higher margin than other offerings and therefore deserve more attention. Some of your services may also carry higher margins. For example, an hourly service you can perform yourself, rather than paying an employee or subcontractor to do it.

To sell more high-margin items, try to:

Allocate premium shelf space, countertops, or webpages to spotlight your highest margin products and services.

Provide a financial incentive to employees to focus their sales efforts on high-margin items.

Increase your prices slightly – even a small increase in your selling price can boost your bottom line, and chances are your customers won’t notice.

Suggest your premium products or services to customers instead of their usual purchase.


5. Increase net profit margin

Net profit margin is an important indicator of the health of your business. It can tell you (or your management team) if the cost of goods sold is too high, and whether or not operating expenses are being adequately contained. Net profit margin tells you how much profit your business earns on each dollar of revenue. It’s often expressed as a percentage to facilitate comparisons between businesses of different sizes.

Improve your net profit margin by examining your gross sales and net margins. Here’s how:

Research your main suppliers and research whether you can find lower-cost providers.

Re-tender to existing suppliers to re-quote if you believe there are savings to be made.

Identify your top overhead costs to find savings – review operating expenses like telecommunications, insurance, office supplies, app subscriptions, and staffing levels to spot potential savings.

Review your business practices and processes to see if you can find opportunities to improve efficiencies. For example, upgrading to newer software can often save a company time and money.

You may find opportunities to save money by buying goods in bulk or on sale. Talk to a Meridian Business Advisor about short-term financing options.


Advice and next steps

When you start thinking about how to increase your profits, share the task with your employees, who will often have a different outlook than you. It’s also a good idea to consult with your accountant, or any other advisors you use, to brainstorm additional tactics.


Wondering where to start? 

Take these actions now to increase your business profits:

  • Check which products or services generate the highest margins and make a plan to focus more attention on those items.
  • Review your lead capture strategy to make improvements.
  • Create compelling offers to help convert more leads into sales.
  • Explore ideas to reduce your banking and borrowing costs by speaking with a Meridian Business Advisor.

 

Learn more about managing your business

Meridian Credit Union communications are intended for informational purposes only and do not constitute financial advice or an opinion on any issue. We would be pleased to provide additional details or advice about specific situations if desired.

For permission to republish this content, please contact the Meridian Credit Union Marketing Department at communications@meridiancu.ca. ©️ 2022 Meridian Credit Union