10 Ways to Improve Profitability

Regardless of your level of turnover, profitability is key to funding the growth and expansion of your business.

These are 10 of the best ways that I've found to work when working to increase profitability :

1.  Know your Break Even Point.  In other words know how many units you need to sell to cover your monthly overheads.  This should be your minimum monthly sales target to avoid a loss and of course any sales above this point will contribute directly to your bottom line.

2.  Produce Accurate Monthly Accounts and financial analysis.  You can't react to a loss unless you know about it as it occurs! Determine what has created the loss and rethink your strategy.  Invest in a bookkeeper / accountant to produce your accounts if necessary - it is a critical part of your business.

3.  Set an annual Budget for sales, gross margin and overheads.  Break this budget down monthly so that you can compare it to your actual monthly financial figures.  That way you'll be able to act swiftly on variances before they get out of control.

4.  Ensure that you have a Strong Credit System in place for customers on credit.  This will involve credit checks for all new customers, timely invoicing, monthly statements and cash collection procedures.  Consider the possibility of setting your customers up on direct debits.  Bad Debts can have a huge impact on your bottom line.

5.  Where possible Ship your product Directly from your supplier to your customer.  I've experienced companies achieving huge savings in storage costs, rent and insurance after switching to direct deliveries.

6.  Review all of your Insurance Costs and requirements and then shop around.  I recently did this and achieved a 25% saving in all of my business insurance costs.  For a lot of businesses this can be a substantial cost.

7.  Again review all of your Current Utility providers ie Electric, Gas, Mobile, Broadband , Landline etc...  Contact competitors for cost savings or review price comparison websites.  All savings here will directly increase your profit.

8.  Arrange a meeting at your bank to discuss ways of decreasing your Bank Fees and interest.  If you make foreign currency transactions when paying creditors etc..  the associated bank fees can be quite high.  Discuss with your bank less expensive ways of conducting these transactions.

9.  Use Technology such as Gotomeeting.com, Skype and Netviewer when conducting meetings instead of actually travelling to minimise costs.  Travel costs and lost time can add up quickly.

10. Review your Selling Price.  If possible don't get trapped in being the lowest priced.  Attach other strengths to your brand such as quality, reliability, expert etc..  Build brand loyalty and review other competitors to determine what selling price your market will accept.  Being known only for your low prices could be detrimental to your business if a lower priced competitor enters your market.

Do you have a tip that wasn't included above?  Let us know the ways in which you improved the  profitability of your business.