How to increase profitability
As a business, increased profitability should be one of your main goals. There are in fact four basic ways to get increased profitability for your products or services:
- Increase price- The price of your product or service is often dictated by the industry standards, however, anyone who wants to increase profitability is given the option of raising their prices. This is not always the best option, as it can lead to customer dissatisfaction, and loss of customers, but per sale you have, profits will increase. If raised well (without too high of jumps, and not enough to make you lose existing customers), this can be a really great option that helps you keep up with inflation.
- Increase customers- If you gain new customers, your profitability will increase. The more customers you have, the more you sell, and thus, the greater your overall profits. This is of course one of the most sought after options, and it requires a good marketing place to be in plan. It can also help to develop new or different uses for your service or product in order to reach a wider audience. Social media is a great tool for this specific profitability tool.
- Increase usage rates- - If you up how often your consumer should use your service or product you increase your profits. For example, if you sell a toothbrush that lasts 6 months, and change the recommendation to replacing it every 3 months, you are looking at increased profitability. This is why shampoo bottles often have the "Rinse and Repeat" option on the bottle, in order to get users to use twice as much, thus replace it twice as often. Look at your product or service and determine if you can increase usage rates, not everyone can, but they may be able to add a new service or product that needs to be used more regularly.
- Decrease your costs- This is not a decrease in price, but in the cost to you to make or house a product or provide a service. This is one of the best options, it involves cutting down your products or service costs, overhead, etc. so that for every sale you make you earn more from it. There are a lot of ways to do this, you can go to a virtual office reducing office expenses, decrease the number of employees you have, look for lower cost suppliers, etc.
Each of these options will help you increase profitability, however, the best way to gain greater profits is to provide great value to your customers, and in doing so attain profitability goals. The more customer focused you are, and the better service and value you provide, the less you have to work to be profitable. Often a combination of the above four ideas is the most effective ways to increase your business profitability.