First 3-4 years are extremely crucial for the functioning of a SMB, as 50% of the businesses fall during that time. Learn 15 easy ways to increase the profitability of your business and make it a success.
15 Ways to Increase the Profitability of Your Small Business
Profitability is extremely important, especially for a small business. A reasonable profit ensures your business is able to stand the test of time and the influx of competitors.
Running a profitable small business is no piece of cake, as evidenced by the fact that 82% of businesses fail because of cash flow problems in the US alone!
So, how do you go about giving your profit margins a boost? The initial 3-4 years of functioning are extremely critical as more than 50% of the small businesses fail during that time period.
The truth is, there are many ways to cultivate a profitable bottom line, and some of the best ones are mentioned below:
1. Hire Only the Best Resources
In a SMB, you cannot afford to hire employees with lackluster skills. Therefore, make sure to always interview your resources thoroughly while understanding their aspirations.
As your business grows, so will your employees, and hiring the ones who tend to stick around and gather experience will greatly benefit your business down the line.
2. Prove You Are an Expert
Customers will only trust you and accept your products if you prove that your offerings are legitimate and better than your competitors.
You cannot buy trust, but slowly work towards it. Increase customer interaction and brand recognition by posting videos, resources, and blogs on diverse social media channels, and earn the reputation for being a thought leader in the industry.
3. Set Monthly Sales Goals
Monthly sales goals are hard to compute and take some effort but will help you to focus on your weekly sales objectives. Thinking about the future on a month-on-month basis can help your bottom line immensely.
4. Take Calculated Risks
A true businessman takes calculated risks to seize small opportunities and turn those into big ones. Ensure you do a cost-benefit analysis before making a move though, and also figure out an alternate plan for a worst-case scenario.
5. Find Ways to Increase Revenue
By generating higher revenue, you can optimize your profits better. You can find ways to upsell additional items and services to your customers for more business while focusing on your sales funnel to implement new ideas for attracting new customers.
6. Focus on Steady Cash-flow
A steady cash-flow is critical to your business’ overall profitability. Make sure your employees are paid on time. Create a list of monthly one-time and ongoing expenses to figure out how much cash you need in hand.
You can use this helpful break-even chart by Score to track your profits.
7. Create a Winning Pricing Strategy
Evaluating your pricing strategy for errors will help your business turn profitable faster. By figuring out your hard and soft costs, you can focus on pricing your products accurately and attracting buyers.
Make sure to eliminate wastage so as to control your prices.
8. Appreciate Your Employees
Hiring passionate employees is only half the job done. As their employer, it is in your best interests to keep them happy and satisfied by treating them as your equal.
Nurture their ambitions and be positive when receiving their suggestions. With the right team, your business will thrive and grow.
9. Leverage CRM to Keep Track of Customers
Using a CRM (customer relationship management) can help you effectively plan your customer interactions.
A CRM stores all your customer information at one place, along with information of products/services they have purchased, and how soon they are up for renewal or maintenance.
Providing excellent customer service is the first step toward profitability.
10. Get an Accounting Software
Pen and Paper can only help you so much. Keeping a close eye on your cash flow is important, and with the right technology, most of your accounting tasks can become simple.
Accounting software come bundled with intelligent and easy-to-use UI, and allow you to easily track invoices and payments. Intuit Quickbooks is a great place to start if you are looking for a robust software.
11. Use a BI Platform to Make Smarter Decisions
Big data is everywhere, and it is just as useful for a small business as it is for a multinational corporation.
BI or Business Intelligence software allows you to organize and analyze important data points such as pricing, sales information, etc. into seamless dashboards.
The Tableau software is an ideal place to start if you are looking to get a BI platform for your business.
12. Get a Website ASAP
Business websites work overtime as your extended marketing machinery, helping you gain new customers by displaying and promoting your services, products, etc. to a global audience.
Ensure your websites are always well-managed and hosted on reputed servers to prevent any downtime.
13. Automate Social Media
Social media is one of the best marketing tools for your business which can help you understand the pulse of your customers.
For a small business, it’s important to provide superlative hands-on engagement with lesser manpower.
Therefore, automating social media tasks such as auto-replies, update scheduling, etc. can be extremely helpful. Try tools like Hootsuite to automate your social media posts and benefit from enhanced visibility.
14. Invest in Customer Support
Sooner or later, your business will grow, and when it does, you will need a team to take customer calls and solve their issues over the phone.
Try and automate your customer support as much as possible and invest some time in building a FAQ and knowledge database.
15. Reduce IT Cost
IT costs can balloon if you are not keeping a close watch, so, outsource your IT work to a reliable vendor to cut costs.
You can also leverage cloud computing and investigate multiple SaaS and IaaS offerings while choosing the correct IT service provider.
Recognize Successful Patterns and Leverage Technology
The essence of entrepreneurship lies in recognizing patterns which have yielded results over the years and leveraging technology to lay a solid foundation for your business.
It does not matter whether you are working on the next big app or run a small family-owned chain, following the steps mentioned above can help you propel your business towards enhanced profitability.
Are there any other methods which have helped you make profit for your business? Share your tips in the comments section below.