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Often in business, the focus is on increasing sales to boost profit. However, there are other ways to enhance profit without acquiring new clients or making extra sales. Improvements can always be made at the margin. Enhancing your systems and processes can significantly impact the bottom line.

Here are 11 strategies to improve your profit:

1. Negotiate Better Prices with Your Suppliers

Look along your entire value chain for opportunities to reduce costs.

2. Set a Pricing Policy

Your pricing policy should include your target gross margin, recovery of all overheads, and replacement of fixed assets.

Pro tip: Ensure your terms and conditions align with your pricing policy.

3. Update Your Pricing Model

Ensure your pricing model includes the latest supplier prices and all input costs attributable to the job, product or service.

Pro tip: Assess how long tasks take, as this can change over time and ensure there isn’t scope creap resulting in your business providing services for free.

4. Know Your Job or Product Costs

Regularly analyse the inputs expensed on some of your jobs each month and compare the actual cost, both labour and supplies, to your cost model.

Pro tip: Start with your highest volume or priced products or services.

5. Eliminate Low Margin and Slow-Moving Items

Replace slow-moving items or jobs with higher-margin ones for a better return in the long run.

Pro tip: Costs can be hidden in after-sales support or with high-maintenance clients. Don’t avoid difficult conversations with clients.

6. Set a Budget for Your Team

Give your team something to aim for. Regular reports and feedback will help them achieve their goals.

Pro tip: Involve your team in the budget process to increase their buy-in and gain insights they may have.

7. Monitor Your Results

Track your performance and measure progress against Key Performance Indicators (KPIs).

Pro tip: Develop your KPIs when setting your budget to know what success looks like.

8. Reduce Wastage Measure twice, cut once; or do it right and do it once. Scrap, wastage, and re-work all cost money and can drive customers away when your delay, delays your customer. Having to return goods is expensive and frustrating; if a service does not meet expectation this can result in confrontation and dissatisfaction.

Pro tip: Don’t budget for waste. It provides an excuse for mediocrity.

9. Review Your Sales Process Ensure your team knows which products or services have the greatest profit margin and that their product and service knowledge is up to date.

Pro tip: Ensure any sales team incentives focus on profit and cash as well as gross sales.

10. Have a Business Plan A business plan helps you understand how your business is put together. Use it to monitor progress, hold yourself accountable, and control performance.

Pro tip: Ensure all aspects of your plan align. Does your sales and marketing resource match your sales targets? Ensure your manufacturing, servicing, or distribution resource can deliver your sales.

11. Involve Your Accountant Your accountant can help you build a profit improvement plan and guide you to achieve your goals.

Would you like to know more?

For Expert Guidance for Your Business – Contact us at enquiries@informba.com or call 03 9399 3769 for professional advice on business advisory, consulting, tax and accounting. Let’s discuss your next steps today.