5 Ways to Increase Profitability

5 Ways to Increase Profitability

Is it possible that you’ve been looking at your business with your “insider’s eyes” for so long that you simply aren’t seeing the simple, easy ways you could quickly increase profitability?


Here is a quick list of five ways to increase your business’s profitability:


  1. Raise pricing.
    While business owners typically push back on this one, seven times out of 10 a small business owner (sales under $10 million a year) can increase profitability by strategically mapping out a price increase on its products and services. Now you have to be smart about this. For example, you may want to do a quick “margin analysis” and see profitability by key breakdown (e.g., by customer, by product type, by niche, etc.) and start with one client type or group, or with a few of your less profitable service or product offerings.

    Pick a date at which time you’ll raise pricing on all new clients coming in. Consider planning out a sales campaign to “sell into” that price increase. Then go back to your existing clients and raise pricing in a thought-out way. Often this means breaking a large customer group into smaller subgroups and rolling out the price increase in waves to each group, giving you time to fix any glaring errors in your thinking without going straight to all your clients.

    The bottom line is that too many business owners are scared to adjust pricing because they think customers will balk.

  2. Improve collections.
    After pricing, revisiting your collections system is the second easiest place to immediately increase profitability for most companies. Most companies collect too slowly and lose out on a concrete percentage of their due money along the way. Often this is caused by sluggishness in invoicing clients or tracking systems that don’t accurately track and invoice for all that’s owed, including materials or other expenses. Or it can simply involve a discomfort in talking about money with clients, in which case this critical part of the business is ignored for long stretches of time. This part of your business is too important for you not to get asolid grip on now.

  3. Feed your winners; starve your losers.
    One of the fastest ways to boost cash flow is to immediately redirect money from your bottom marketing performers to your top 10% to 20% performers. You’ll spend the same amount of time and money on marketing, but you’ll get a fast and predictable boost to your sales. The same thing is true with your key strategic relationships. There is a small subset of these relationships that out produce the other relationships by a wide margin. By narrowing your focus to support your winners with more attention (and in some cases money), you’ll get a dramatic increase to your sales results.

  1. Control your single greatest cost — staffing.
    Your single greatest expense is likely your team. Are your staffing levels at the optimum place? For example, one medical practice determined it was overstaffed by 20% to 25% on its clinical staff. That equates to a loss of $250,000 to $300,000 per year. It would be a smart move to make an hour of time to sit and think through on paper if your staffing levels are optimal for your business.

  2. Increase your sales team’s Direct Sales Time.
    Direct Sales Time (or DST for short) is the measure of the actual number of hours per week that your sales team members are engaged in direct sales activities with actual prospective buyers. The reality is that most salespeople don’t spend enough time on direct sales, but they find ways to rationalize it to themselves.

    By having your sales team TRACK and report daily on their DST, they’ll often start increasing their best sales behaviors by 25% to 50% or more on a consistent basis. This one simple key performance indicator can help a client fix a lagging sales team’s performance.


A business owner reviewing the books and noticing that a substantial amount of the operating costs are being consumed by energy costs may want to consider another tactic along with these performance-boosting measures. By investing in energy efficient systems, like light emitting diodes (LEDs) or a modern heating, ventilation and air conditioning (HVAC) system, a business owner can see numerous benefits across different areas, including boosting employee performance, making products look more attractive to customers and reducing energy costs.


Learn more about the potential benefits by downloading Pacific Gas and Electric Company’s “The Big 4 Essential Benefits of an Energy Efficiency Project for Your Business.”


This article was originally published on: INC.com and has been modified.