7 Profit Boosting Ideas for Tomorrow's Businesses
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The difficulty of boosting your bottom line optimization is straightforward if you zoom out and look at the broad picture - at least in theory. You have the option of increasing income, lowering expenditures, or doing both. Getting this done, on the other hand, is a another matter.
The two keys to improving your bottom line
The primary lever of bottom-line optimization is top-line growth. While it's the most exhilarating way, it's also the most hardest to do.
"Top line growth" refers to a rise in gross sales and income, as explained by businesswoman Mary Hart. "You've brought in more customers or sold more to your existing customers, and you've made more sales than the previous month or year when you achieve top line growth."
The second lever of bottom line optimization is bottom line growth. This is typically simpler, albeit there are limits to how much you can do.
"Bottom line growth," as Hart puts it, "means you've reduced your operational costs and overhead to improve the number at the bottom of your P&L statement."
In reality, the phrase "bottom-line growth" is a bit of a misnomer. It may be more accurate to say "bottom-line contraction," but that isn't the point. The idea is that cutting costs may help you boost your bottom line.
Most businesses are only concerned with one level or the other. They either become laser-focused on top-line growth or get enamored with bottom-line growth. But, to be honest, the best results come when you target both at the same time.
7 ways to improve your profitability
There are a plethora of options available to you when it comes to enhancing your bottom line and growing your profitability. The idea is to concentrate on the most important needle-movers. You want to stress the most important acts.
In light of this, here are a few of our favorite pointers:
1. Find the right clients
The Pareto Principle is a traditional business concept that we're taught from the beginning of our professions. And, no matter how many times it's said, it's still true. This idea should also be used to your customer acquisition efforts if you want to increase your revenue.
According to the Pareto Principle, just 20% of your consumers will account for 80% of your sales. Take the time to examine your current consumer base and figure out who the 20% are. Then devote all of your sales outreach, marketing, and message efforts to finding these people.
If you concentrate on attracting these consumers, your income will skyrocket quicker than you could have imagined.
2. Increase your fees
This may seem self-evident, so why not increase your prices? We are in an inflationary period, and it is typical for firms to raise their pricing. People may not like it, but they are aware of the situation.
You might see huge revenue increases with only a minor increase. If you sell 100 units of a product every day at $90, raising the price to $93 per unit might increase your monthly earnings from $270,000 to $279,000.
That's an extra $108,000 in sales each year (or 3.3 percent increase) by raising the price of a product by only $3. Obviously, it is a fairly conservative example, but it is supposed to demonstrate how successful this may be.
Let's look at an example of a service. If you offer a $49 per month SaaS subscription and raise your rates to $59 per month by introducing a simple new feature, you've generated an additional $10 in monthly income.
If you have 10,000 clients who stay for an average of 36 months before departing, you'll earn an additional $3.5 million over the course of three years.
You'll have to deal with some resistance to price hikes, but it's typically not as bad as you think. You may even grandfather in existing clients and charge more for new customers if you want to be extra careful.
3. Include complementary items
This is one of the most significant lost business chances. Whether you offer physical goods or services, you should always be on the lookout for complimentary items to sell in order to boost your average order size. Complementary items may be found almost everywhere. Some instances are as follows:
- Movie theaters do more than simply sell tickets to movies. Popcorn, sweets, and beverages are also available for purchase. Arcades and party rooms are available for hire at some of the locations. In addition, there is movie-related products. You may even be able to pay an additional fee to book a specific seat in the theater. All of these items work together to increase average revenue per client.
- Golf courses sell more than simply rounds of golf. They also offer buckets of balls for the driving range, clubhouse meals, and pro shop products. These are goods that work well together.
- Coffee shops offer more than simply coffee. They also offer pastries, premium Wi-Fi, and mugs, among other things. Again, these are basic add-on items that they know a certain proportion of their target audience would purchase.
- It's not like every buyer will purchase your complimentary items. If you can convince 10% of individuals to spend 15% more each time they complete a transaction, you've made a net profit.
4. Minimize your expenses
Expense sheets that are too long are prevalent. The difficulty is that since the bloat is constantly there, we never realize anything is wrong. You may save money if you spend time carefully reviewing each line item on your expenditure sheet.
Getting rid of subscription services you no longer need, converting from paper-based to paperless procedures, and outsourcing jobs that don't demand a full-time team member's attention are all small cost-cutting strategies.
However, there are certain large costs that might have a huge impact on your bottom line. A good example is office space.
If this epidemic has taught us anything, it's that conventional office space isn't necessarily required. You may save thousands of dollars each month by becoming completely remote (or reducing your "in office" employees in half) instead of paying exorbitant leasing or mortgage fees.
5. Put money into preventative maintenance
The majority of organizations deal with maintenance on an as-needed basis. (In other words, when the McFlurry machine at your local McDonald's breaks down, the crew examines the problem before having it fixed.) The issue with reactive maintenance is that it results in unneeded downtime and higher costs.
According to some estimates, reactive maintenance is 3 to 9 times more expensive than preventative maintenance.
Preventive maintenance solutions that address important problems and concerns before they break are essential if you want to save money. Downtime is reduced, safety is improved (in certain situations), expenses are reduced, and efficiency is improved. It's a foregone conclusion.
When it comes to big equipment or automobiles, preventive maintenance is extremely vital. A good example is fleet management.
Vehicles can operate in top form by proactively fixing essential systems like brakes and rotors, tires, fluids, and belts. This lowers the risk of an accident, improves fuel economy, and enables the corporation to resell the inventory at a greater price when it's time to replace the cars.
6. Debt refinancing
Debt payments might add up to a significant amount on your balance sheet. While paying down debt isn't always the best option (especially given how low interest rates are right now), refinancing may be.
Let's imagine you have a $1 million debt with a 6.5 percent interest rate. You might possibly save $1,500 per month by refinancing to a 5.5 percent rate. That's a great bargain, particularly since it doesn't need any work or sacrifice.
7. Enhance employee education
Then there's your group. Employee training isn't the most appealing subject, to be sure. It is, however, something that might save you a lot of money in the long term. It not only allows you to get more out of your employees now, but it also has the potential to drastically reduce your long-term expenditures.
According to research, recruiting internationally costs a firm 18% more than employing internally - and that's just in terms of compensation. When all of the expenditures of recruiting and training that go into bringing in a new body are included in, it's more like a 25% premium.
You can grow your talent and assist them to climb the ladder by investing in greater training. As a consequence, the firm saves money and has more loyal customers.
Putting everything together
Good things happen when you stop focusing on either raising sales or cutting expenditures. Instead, the focus should be on how to accomplish both at the same time. As this essay demonstrates, there is plenty of low-hanging fruit to be found.
It's entirely up to you to devise a strategy. Consider this a friendly reminder to get started as soon as possible!