Being profitable is the aim of every small business when they start. Some achieve this and use the profits to grow while others continue to live month to month with very little to show for their efforts. Here are five strategies to boost your SME’s profitability today.
1. Examine your product
It is important to examine each product or service you offer and see what the profit margin is on each item. You do this by working out the cost of producing the product and the price of the product. If there is a small margin then you need to examine how you can improve the margin without losing quality. If the product or service is an unpopular item with your clientele then you could also consider removing it from your product list.
2. Cutdown on overheads
Many times small businesses accumulate more overheads than they use without realising it. It is important to review your overheads every quarter and remove those overheads which are not adding to the profitability of your business. If you have subscriptions to apps or computer programmes ensure you still use those apps and programmes and if you don’t cancel the subscriptions. If your team works remotely and only needs to meet occasionally, consider using co-working spaces for the times when you need to be gathered as a team.
3. Look at your employees
At the start of your business, it is crucial to only have the right number of employees who actively work on bringing revenue into your business. If you need to hire someone to clean your office, consider using a company which hires out staff to come in once a week rather than every day. You should also examine how each employee spends their day.
By tracking their time, you can see where there are bottlenecks and ask your employees how you could improve the processes which causes them to lose precious time. Because remember for every minute your employee spends on a non-revenue producing activity, you are still paying for them. Therefore it is critical to automate as many non-revenue producing activities as possible.
4. Pamper your best clients
Finding new clients can be expensive, therefore it is crucial to look after your existing clients well. Word-of-mouth is also the best marketing you can get as many people would rather use a company that was suggested from a friend or family member. You could set up an affiliate program and reward your existing clients for the new clientele they bring to your business.
Another way to help increase your profits is to listen to what your customers want and if it is possible to add the extra product or service to your business then do so. Remember to do thorough market research before adding the extra product or service. It should be wanted by more than a small group of your existing clients. You could also consider cross-selling or upselling to your clients.
Another way to keep clients with you for the long haul is to offer retainer packages for several sessions so that they stay with you. You can also add them to an email list and send out an informative email once a month to keep your business top-of-mind.
5. Check your inventory
If you are business which holds stock, you must take inventory often. This will help you to identify slow-moving products and check for any losses due to theft or overdue dates. You should also try to automate your stocktake process so that there is very little human error during your process. Another avenue to look into is if there are new suppliers available for the products or raw materials that you need and see if you can get a better deal with them then your current suppliers.
Another matter to keep in mind is to ensure you are getting the product or raw material from the cheapest person you can get it from. For example: if you buy paper, ensure you are buying from the producer rather than your local stationery store.
By following these five strategies you will be well on your way to improving your small business’ profitability.
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