Increasing profits is the fundamental purpose of any commercial enterprise, but there’s something about the start of a new year that brings renewed enthusiasm and determination to reach and exceed targets and achieve more over the months ahead. If you’ve been caught up in the usual New Year’s resolution merry-go-round, you’ll understand that promising to achieve a goal or take action to realise your ambitions is very different from actually taking the steps required to make those promises a reality.
If you apply that reasoning to your business, then looking through your financial reports and resolving to increase your profits this year is exactly the same – saying something doesn’t make it happen, you have to follow it up with effective action. If you truly want to get your profits up this year, you’ll be dealing with all the external influences like the economic climate, political situation, and local factors such as the Northern Powerhouse. Some of these may work in your favour, others against you, but they all need to be included as influences on your potential profits.
There are two ways to increase your profits:
- Increase your revenue
- Decrease your expenditure
The idea is to work on both these factors to optimise your profitability.
You could increase revenue by putting your prices up, which you may feel will cause a reduction in your total sales as people go somewhere cheaper. On the other hand, you may reduce your prices in the hopes it will increase your total sales and that quantity will compensate for the lower profit margin. These kinds of decisions can’t be taken without making a detailed analysis of your market and the trends within it, so you make the decision that’s going to be most beneficial for your business.
You could decrease your expenditure by renegotiating with suppliers or finding an alternative source; streamlining your office functions and using more freelancers, or outsourcing more of the responsibilities, which could all save money. Don’t forget that overheads like utilities, rent, and rates all need monitoring to make sure you’re paying the best price available. Try comparing the difference in charges between commercial gas services from Utility Bidder. Every saving you make on your overhead costs contributes towards the net profit, so don’t neglect these checks.
Another option is to increase your profits by investing in your business, and in many ways, this is the essence of business growth. If you could end up with more money by the end of the year it would be worth investing now; it’s just a question of what to invest in and how to pay for it. Part of being a successful entrepreneur is recognising these chances to invest in growth opportunities and run with them, so you could test your entrepreneurial mettle this year and see how well you could grow your own profits.
If you don’t feel the time is right for re-investment, you still have the other options available to you, so if you put your mind to it, you will be able to increase your profits this year.