Many business owners think you need to increase sales substantially to get more money. Actually that’s often too difficult, especially in the short term. So here are some alternatives. There’s another way to get more money, which is to increase your profit margins . Same clients, same level of physical sales, same systems, no more staff or extra overhead costs, existing premises and capacity—isn’t that a thought?
So, here are six ways to help you sort out the question of how to increase revenue in your business They are actually really quite simple and if done properly, they will make a huge positive impact to your bottom line.
Make sure you know your up-to-date, generally gross profit margin. It’s no good using estimated inventory figures or working from the figure in your last Annual Financials. Prepare some interval records to the last month-end from your accounting software. Using the inventory system in MYOB means there’s no requirement for a stock take. Get some benchmarking figures from your accountant?
How does yours contrast with a newly launched business?
Your overall gross profit revenue could be deceiving.
Discover the gross overall profit on each of your products and services, and analyze your gross margins over different business divisions, product categories, suppliers or customer categories according to your business.
This way you can identify both low margin or loss-making things and profitable activities or products. Then you can quit selling low margin lines and focus on the ones that work.
Increasing your costs will increase your profits immediately.
In case if you’re worried about increasing your prices, please remember that most of your customers will accept a price increase providing you give them a good reason. The ones that don’t, well they probably arent your best customers anyway. You may find that the customers you lose are the ones who take the most of your time and effort, want everything done yesterday and cause you the most stress. If you ever heard of the Pareto Principle, also known 80-20 rule, you will know what I mean. Most organizations get 80% of their business from 20% of their customers.
There are many reasons why customers purchase from you, and cost is only one of them. For example your clients have a good relationship with you, they like the service you provide or you are in a convenient location. Some customers simply can’t be bothered shopping around to find someone less expensive.
New clients can help grow your business. However, this can sometimes be the most expensive strategy for generating extra revenue . On average it costs multiple times the amount of money to acquire a new customer as it does to retain a current customer. The easiest (and most cost effective) way to get new clients is to offer incentives to your current clients and motivate them to initiate referrals for you. Word of mouth is the most impressive kind of advertising.
In a many circumstances, there are organizations that could increase their sales without increasing the cost of delivering sales. If you are doing $100,000 every month, it’s quite possible that you could do $120,000 per month before you have to hire another person, get a bigger premises, and purchase another van or a new piece of equipment. If you have got the resources, make sure you are utilizing them to their full potential. Expand your ability because then you are going to maximize your profitability.
The products or services with the highest gross profit margin are the most essential to your business.
Once you have identified your most profitable products or services you should focus on these. You will need to determine if the unprofitable products or services should be removed completely or reviewed for areas of progress.