What actions can small business owners take to grow profitability? Here are ten practical, proven suggestions that could make a big difference to your business.
1 Increase your prices. Many businesses price too low or set initial prices but then do not raise enough from year to year. Do your management accounts provide enough granularity to tell you about profitability at an individual product or service line level? If not, perhaps it's time to review your internal reporting systems.
2 Improve your business processes. Find efficiencies and get rid of activities that add little or no value. See our article on business process mapping.
3 Involve your team. Empower them to help you find ways to improve profitability.
4 Review your overheads. Are there costs that could be trimmed - or eliminated altogether? What are your management accounts telling you about your cost base? Is your budgeting process sufficiently robust?
5 Consider how technology could help you improve returns. Can tech drive better efficiency, give your business more marketing reach, or enable you to provide more value to your customers? Contact our tech team today for more help and ideas.
6 Boost customer retention. Finding new customers can be expensive. Look for ways to boost retention by offering more value to your customers.
7 Focus your efforts and attention on your most profitable customers, products and channels. If you don't know who your most profitable customers are, perhaps it's time to review your financial reporting systems. Modern cloud accounting software such as Quickbooks and Xero can be a good investment.
8 Make it easier for customers to buy from you. Streamline the sales process. Bundle products and services; sell in larger sizes; offer incentives.
9 Review your working capital management approach. Consider whether you are holding the right levels of stock; take advantage of supplier credit terms; make sure you get paid on time. You can read more in our article on working capital management here.
10 Monitor your development costs. Product/ service innovation often requires short term investment for longer term gain; that's fine, as long as the process is carefully managed. Make sure your R&D activities stay on track. Also, if you trade as a company, remember to claim your full entitlement to R&D Tax Credits for any qualifying expenditure. Our tax team can explain how R&D Tax Credits might benefit your business - contact them today for details.
If you would like to discuss - or even implement - some of these suggestions in your business, contact us today to see how we can help you.