For every business whether big or
small, profits are vital for their
There are several strategies that can be used to increase profitability. When choosing the best strategy, it is important to consider the sustainability and safety of a strategy. After choosing a strategy, it is wise to plan on its implementation. There are several strategies to increase profitability, one being increasing sales revenue. This can be done by developing new products, venturing into new markets, improving customer services, price discounts and promotions, raising prices, retail displays among others.
Decreasing costs is another way of increasing profitability. In order for a manager to cut costs, they should understand the nature of expenses and how they relate with sales and costs of goods. Preparation of profit and loss statements should be done often to get all the information on expenses. Proper records should be maintained to be referred to when analyzing and asserting the costs incurred. When this strategy is used, however, the quality of products offered should not be compromised making the sales remain constant. Good systematic procedures and methods will help reduce cost.
One of the major ways to decrease costs is by ordering what is enough to run the business surplus should be avoided as in most cases it ends up not being used. One may also streamline the business by decreasing the inventory. Theft by the staff and customers can be eliminated by putting in place preventive systems. Decreasing direct costs is a sure way to increase profits. The manager should always go for cheaper but quality services and goods. Rather than taking products on credit, negotiating with suppliers for a discount and or better prices can raise the businesses profits.
Indirect costs reduction is another major way of increasing profits. A business should adopt low-cost techniques of things such as traveling and marketing. Labour costs in some industries is an indirect cost while as in others it is direct, in either case, a business can lower labour costs by emphasizing on high performance. For high performance, a business should hire qualified employees and if possible it may consider hiring part-time workers. Training employees will help minimize waste and errors which would otherwise hike the costs.
Unnecessary expenditure can be detected and thus allow improvement by reviewing systems and processes. Expenditure in terms of utility costs can be reduced by finding alternative cheaper means. For example, a business may opt to use solar energy whenever they can. Reviewing systems can help minimize wastage when a problem is discovered and ways to solve it are discussed. It is always good to benchmark financials by comparing costs with similar businesses in the same industry. This will enlighten the manager on whether the business is paying too much for a service or product. One can also get acquainted with information on techniques to adopt to decrease the cost for example: Identifying a cheaper insurance policy, knowing ways to save water, methods used to cut maintenance cost among other information.
As mentioned above there are several ways of decreasing costs in order to raise a business’ profit, however, some of the ways may require money to implement. The sooner the implementation the sooner the increase in profits but how do you raise an extra amount you do not have? Worry not the Certified Business Loans (CBL) has you covered and will sort you out soonest possible. When you need a small business loan service, CBL will get you the loan without having to wait for weeks to get the loan. This means that your business will not be halted by lack of finance. There is no need to read the bulky paperwork with terms and conditions that are not understandable while you can get a simplified and easy to understand the agreement. A major benefit of using CBL is the fact that, for a loan to be approved, a business needs to have been in operation for an year and the cash flow be consistent. CBL will help build credit and deduct only a fixed amount of payment. Your personal assets are not involved as security just a personal guarantee and the business assets are the liens.
Small business ought to adopt methods of decreasing their costs in order to raise the profits of the business, be it in direct or indirect cost, overheads or in any other way. Decreasing costs is a major strategy of increasing profits.