3 Ways to Increase Your Profits

Just because you are in business does not necessarily mean you are making money. Further, just because you are making money doesn’t mean your business actually making profits. Making money is great, but profitability is key! Revenue is money you make, profit is money that you keep. The money you make from your sales should cover your business expenses and whatever you have left over are your business profits. If you are making sales but you feel like you aren’t actually seeing any money you are making after expenses, there are a couple of things you can do to try and increase your profits so you can start to see more money coming through your business.   

1. Cut Costs

The first thing to review when trying to increase your profits is how much you are spending in expenses. You want to make sure you are consistently monitoring your costs to ensure you aren’t overspending or spending money unnecessarily on things that are no longer useful in your business. Overspending is the quickest way to eat up your profits. Now, when cutting costs you want to reduce your expenses as best you can but you want to be sure to cut costs without cutting the quality of your product or service. You should be monitoring and tracking your expenses on a regular basis using some type of bookkeeping system. The system you should use to monitor and track expenses is whichever one you will actually use consistently. You can use paper and pen, an excel spreadsheet or an electronic bookkeeping system. I personally would recommend utilizing Quickbooks. I know the thought of bookkeeping may sound intimidating but Quickbooks is very user friendly. Look at those expenses to see where you can afford to cut back. 

2. Find More ways to Monetize

Once you have looked at your costs and cleaned things up as much as possible, it’s time to take a look at your income. If you aren’t making as much money as you would like, you can look at your business model to see where you can add an extra stream of income. You don’t want to make this a stressful process that will cause a distraction or throw your business out of whack. You want to see where you can add income that will be a seamless addition to your business. For instance, if you have a service based business, you may be able to add a product line to your business, whether it be digital or physical products. If you have physical products, it may be beneficial to offer an additional product that compliments something you already sell. For example, if you sell candles, you can consider essential oils or room sprays as an alternate option. Additionally, packaging items as bundle deals would be beneficial as well in order to increase your average order value. The key to making this work is adding something that won’t be an added stressor to your business. If you are a tax preparer, it would be an easy addition to maybe add a tax class, or an electronic guide to preparing for tax season. It would be a distraction if you suddenly decided to add a shoe line to your business. Again, the key is to insert another stream that will compliment what you are already doing.

3. Increase Prices

Last but not least, increasing profitability may come down to simply increasing your prices. If you have analyzed your costs and can’t reduce anywhere else, increasing your prices will increase your income. Your business income must cover your business expenses but in addition to that, you want to ensure your prices are aligned with your income goals. Many times we aren’t seeing the profits we would like, not because we aren’t making sales but because we aren’t charging enough. Now, this isn’t the case all the time but I see this a lot with service based businesses. Review your offers, review the value that you are giving to your clients, the time and effort you are contributing to your projects and ensure your price points are assigned accordingly. 

If you need direction on where you can cut some of those costs, check out this video about the 4 most common ways small businesses waste money.