All businesses big or small, should be operating with the primary aim of making a sustainable profit.
Definition of Profit
Profit is an absolute number determined by the amount of income or revenue above and beyond the costs or expenses a company incurs.
Definition of Profitability
Profitability is the ability of a company to use its resources to generate revenues in excess of its expenses. In other words, this is a company’s capability of generating profits from its operations. Profitability is a measurement of efficiency.
5 Tips to Increase Profitability
1. Increase revenue – Sell more to your existing customers – what complimentary products or services can you add to your offering. Get new customers- who are your new customers and how are you going to get them? When was the last time you reviewed your pricing?
2. Manage costs – review your profitability for each product or service line. Do you understand your true costs? Review each expense, you can renegotiate most. Don’t cut costs for the sake of cutting costs, determine how the expense adds value to your business. Set a budget and review it regularly against actual expenditure.
3. Increase productivity – reduce distractions in your work-space, make yourself accountable to someone and reduce your interactions with timewasters.
4. Increase efficiency – align your daily tasks with your business plan and strategy, automate processes and workflows. Outsource or delegate tasks that are not your strengths.
5. Expand your existing market – look to differentiate your product or service to attract a new demographic or expand your geographic market, can you have an online shop or service.
What are you doing to improve your profitability?
Have you updated your business plan? A well-crafted business plan will also be able to pinpoint some of the areas that may need an overhaul.
If your business is struggling to make a profit or you think that your profitability metrics are out of kilter – book a consult with us.
Aurelius Advisory has a fantastic track record of helping business owners achieve their dreams and goals; allowing them to have a happier life and enjoy a much better work/life balance