Increase Profits Without Increasing Sales
For a business to be successful, it must enjoy profits. The problem is that too many businesses focus on increasing sales to increase profits and for many that can be a fatal mistake.
According to the experts, it’s really quite simple. There are three things you can do if you want to increase profits
- Lower your costs
- Change your sales
- Increase your prices
However, that’s not always as easy to accomplish as one might think. To cut your costs it’s imperative that you understand them. Let’s look at these three options in more detail.
1. Lower Your Costs
If you want to reduce business costs, you might consider utilizing the services of a Cost Reduction Consultant. Cost reduction companies come into your business and conduct a cost reduction analysis. Having a business cost analysis done by an external source can be very beneficial, as they are trained to look at all aspects of your business including operating costs, contracts, overhead costs, leases, inefficiencies, hidden charges, inventory cost reductions, budget overruns, procurement and outsourcing, etc.
When the cost reduction techniques are implemented at the direction of the cost reduction consultant, a business has the opportunity to increase profits without increasing sales
2. Change Your Sales
Changing your sales does not necessarily mean increasing the number of items you sell. A business cost analysis can determine the best way to change your sales. This might include changing all or some of your product lines, the way you market your products, and costs associated with your sales.
For example, let’s say you run a coffee shop and you want to increase your profits without increasing your sales. After having a cost reduction analysis complete you discover that by changing your cups you can save 20 cents per cup of coffee and by changing your process you can save another 20 cents per cup. You’ve now have 40 cents profit per cup of coffee without increasing your sales.
3. Increase Your Prices
Increasing your price can lead to an increase in profits, but it’s a risky undertaking, since it can lead to a decrease in sales from customers who aren’t willing to pay that extra. This is especially true during tough economic times. In addition the bigger the ticket item and the bigger the increase in price, the more likely you are to see a negative consequence for your price increase.
Company Cost Reduction
Your smartest move for increased profits is to invest the time and money in having Cost Reduction Consultant conduct a cost recovery audit to determine where you can save money through overhead cost reduction, production cost reduction, office cost savings, and other cost reduction techniques.
If you feel you have the necessary skills within your company, you can undertake a cost reduction analysis internally. However, the majority of business owners who have both undertaken an internal audit and outsourced a cost recovery audit agree the maximum increase in profits was seen when a cost reduction company was utilized.
Those businesses that can think outside the box will excel in these tight economic times, while those that continue to do business as usual will struggle and often fail. At the end of the day it’s all about profits and changes that will result in increased profits makes good business sense.