Increasing profitability
Being a small business owner, if your turnover and profits are flatlining or in decline, then you need to take a serious look at different strategies to rectify this. If you haven’t already, you need to start producing and, more importantly analysing, monthly business reports…NOW! By looking at the figures regularly, you are in the best position to react, adjust and revert the downward trend quickly, before it’s too late.
Track your sales (revenue and units) and highlight what the trend of both unit sales and average revenue per sale is. This could identify a dip in revenue for a particular product. Consider removing unprofitable products and services to focus on those with the highest gross profit margin.
Your monthly business reports will also allow you to understand what is happening with your costs – chiefly marketing and operational. If costs are increasing but the number of sales is not, then it’s time to consider cutting back. There are many different ways to cut costs and by looking at your business report you can identify areas for consideration – but make sure that you don’t compromise the quality of your products or services.
The marketing budget is often the first to be squeezed. However, remember to calculate the cost of each marketing activity against what they generated in terms of sales before deciding which ones are to go. You may even decide that the solution to your declining profits is it find new customers – in which case, you could decide to increase your marketing budget and claw back the costs elsewhere in your business.
Operational cost-cutting measures could include negotiating more favourable terms with suppliers for purchasing in bulk or looking at smarter ways of working including reducing overheads and staffing.
Saving money and improving your profitability needs to be a team effort so keep your staff informed and make it a collective effort. They may well be able to offer further ideas to improve profits.
But for impartial, expert advice, seek the help of a business adviser – someone who thrives on a challenge and is only too happy to pass on their entrepreneurial knowledge and experience.
If you have an accountant, they should be your first stop for business advice. If you don’t have an accountant or they can’t help, BuBul has a wide range of experts available. For more business advice get in touch with our expert* Neil on LinkedIn?
*We’ve picked experts we know and trust who are good at what they do. All of them will give you at least an extra 30 minutes free advice if you contact them and would then charge their normal prices. They don’t pay to be on BuBul and don’t give us any money from anything they earn as an expert.
