To stay in business, you need to make a profit. This is the topic our in-business SCORE clients most frequently ask about.
I asked for suggestions from our SCORE counselors and compiled these nine categories of potential profit enhancers.
1. Increase prices.
Have you searched the Internet or visited your competitors stores to see what they are charging? Your location, the ability to satisfy an immediate need and the services you offer may allow you to charge a slight premium. Several percentage points can make a difference to the bottom line.
2. Reduce costs.
Renegotiate a better price for your merchandise or raw materials. Consider changing suppliers to get a better deal. Negotiate better payment terms; try for consignment inventory. Might there be an association you can join that may enable lower costs because of greater buyer volume?
3. Increase sales.
Increase the amount and frequency of sales to each customer. Review/rotate/change product presentation/display (change the view, see something new). Train employees as needed to tout products and company strengths. Use social media to raise awareness of your company and its products and services. Make sure you focus on the right part of your market so you can be efficient in your sales efforts. Look for opportunities to tie some future services to current sales, such as maintenance agreements, replacement parts and upgrades.
4. Secure new customers.
Recent surveys indicate that more than 80 percent of your business results from existing customers or from referrals from existing customers. Involve your existing customers. Ask them to provide referrals and consider offering incentives. Consider joining a leads group. Prioritize closing leads.
Are you in a high-end location and paying premium rates for a location thats not critical to your business? Have you discussed your lease rate with the property owner within the past three years? Consider moving to a lower-cost location, or one with better exposure.
6. Cut your inventory.
Review your transaction history. Reduce inventory levels and eliminate inactive items. Have no more than what you sell or use during the replacement lead time.
7. Improve your product mix.
Review your product line frequently. Add new or complementary products. Can a line of lower-priced items add to sales? Might there be items you can bundle?
8. Reduce waste.
Look at every item of your monthly expenses. What can be eliminated or reduced? Waste comes in many forms making copies you dont need, leaving lights on, failing to watch the thermometer, making errors in shipping and billing, and improperly handling merchandise, to name a few. Ask your employees for their suggestions. At times, investment in new equipment can increase efficiency and reduce waste.
9. Control your finances.
Start by reviewing and refinancing all outstanding debt. Collect receivables on a timely basis to maintain a positive cash flow and avoid borrowing or factoring. Sell off surplus or nonessential assets such as land and equipment.
C. Norman Beckert, Idaho district director for SCORE, the Service Corps of Retired Executives. firstname.lastname@example.org