Increasing profits in a business is simple…
Not always easy. But simple.
There are a limited number of “levers” you can pull, on a consistent basis, that will increase profits.
Some are short-term profit boosters that can have a negative impact on the long-term health of the business.
Others can take a little longer to pay off, but represent effective ways to push your business to a higher level of revenue and profits.
The following list of five ways to increase profits is rather comprehensive. While there are likely other ways, in certain businesses and industries, to collect additional profits, these represent a rather universal list — meaning, no matter your business, any or all of these can apply.
Here’s the list — with commentary on each…
- Raise your prices or fees…
All else being equal, raising prices is a fast way to increase profits.
In some cases, this can backfire. When a product or service has low price elasticity, increasing prices will drive down sales and profits.
However, this doesn’t have to happen to you. Ultimately, if your product or service is unique or proprietary — and you make this abundantly clear through your sales and marketing materials — you can easily justify a higher price.
First, figure out what makes you unique. Why should your prospects choose to do business with you, over every other option available to them?
Second, lay out all the potential buying criteria that establish your uniqueness and align with the desires of your best potential customers.
Third, create value-first marketing to educate your potential customers about the advantages you offer, and why they should choose you.
Fourth, make sure you present a clear, compelling offer that emphasizes your uniqueness and the superior result it will get for your customers or clients.
Do this right, and you can easily justify prices substantially higher than your competitors.
And if you’re not unique? Well, make yourself unique! Find out what it is that your prospect most wants — their desired result — and find a unique approach, process, or feature set that will make that faster, easier, or more affordable for them to get, through you.
Then, sell the dickens out of it!
Depending on whether you’re selling an established uniqueness or upgrading your offering, this can trigger immediate profit increases, or it can take some time. But this is an enduring way to boost your bottom line.
- Lower your cost of delivery…
Others are able to increase profits by lowering the actual cost of getting their product or service into their customer’s hands.
In the case of a product, there are a few options here. Selling direct versus through distributors can be a secret. If you’re a major player like Amazon or Walmart, you do this through controlling the supply chain.
Finding efficiencies in your manufacturing is also an option.
Or, consider the media or mechanism of delivery. For example, live, in-person training is expensive. Offering it via recorded media, delivered as DVDs, etc., is more affordable. Delivering the same content online is dramatically cheaper. Yes, there are additional considerations such as perceived value. However, this is worth considering.
Alternately, if you offer a service offering, maybe your cost of delivery is in your hours, as the expert or authority that your clients are paying for.
What of your service can be put into a process? What of your service can be productized, so the customer gets similar value without any effort on your part? What supporting parts of the service can be automated through technology, so you can focus your time on your Unique Abilities and where you provide the most value?
Also, what leverage can you get in your service offering by adding juniors to the team? While you may still be necessary to do the most valuable tasks, it’s likely that as much as 40% of the work you do could be done to sufficient quality by someone with far less expertise than you have. Offloading this work would significantly reduce the variable cost of delivery on each project.
- Fix under-performing assets…
Every business is packed with under-performing assets.
For example, in any subscription business, there’s a massive amount of churn that happens, simply because credit cards expire.
If you run a subscription business and you don’t have a system in place to communicate with customers as their credit card is expiring, you risk losing large amounts of revenue to something that has nothing to do with the quality of your product or service.
Or perhaps you have a product that gets high refunds. If you’re selling a lot but giving a large amount of that revenue back, maybe there are opportunities to improve the product or customer experience to maximize the actual take-home profit from that product.
Likewise, there is room for improvement all over a business.
Your relationship with your past customers could be an under-performing asset, best improved through making better, more targeted, or more frequent offers to them.
Your sales, customer service, or even client service delivery staff could be performing below par. By identifying issues and helping the staff improve or find new opportunities where they’ll excel, you could increase profitability.
- Increase volume…
Depending on what we’re talking about here, this could be the best possible option, or it could backfire.
For example, there is very little additional incremental cost or effort to me associated with more members signing up for BTMSinsiders. Because it’s a library of video-based training delivered online, and nearly every aspect of membership is automated, the additional bandwidth required to double membership is minimal.
That tends to be the case with digital products. And it’s part of why companies with digital offerings of all kinds can scale so fast.
However, if you’re dealing with physical products and you have manufacturing constraints, you may have to throttle your volume increases. Even if you’re able to sell twice as many products, you can introduce unnecessary strain as well as customer service and reputation issues if you can’t deliver.
And it’s even more challenging with services. For example, I’ve been booked since the beginning of 2017 with all the client copywriting work I can handle.
Although I’ve regularly had clients approach me to create campaigns and sales copy for them, I have no interest. My volume is at capacity, for as long as I wish to schedule it out.
- Lower overhead costs…
This is a double-edged sword. While lowering overhead costs like office space, technology costs, and even payroll can increase your profits in the short-term, it has two big risks.
First, you may be eating into your capacity to deliver the value you’ve promised to clients and customers. Depending on the costs you cut, the client experience may be impacted, and the negative effects could be immediate, or could erode slowly through time.
Second, in the case of something like office space, perhaps your swag digs are what attract a certain caliber of employee to you. Or the lunch and learns you do on a monthly basis lead to increased happiness and better performance from your staff. While cutting these items from the budget may seem like a shrewd short-term move, the long-term effect may decrease profits more than you benefit in the short run.
In all cases, lowering overhead costs is a dangerous enough move that it should be carefully considered, and most cuts should be considered a last resort.
One more thought in this regard…
One of the lessons I learned from Mark Ford, aka. Michael Masterson, is that there are three ways to increase your personal net worth.
First, you can save more of what you make. This alone is the long and slow road to wealth, although it is effective.
Second, you can make more, and save a similar percentage. Most people who get really wealthy do so not just by saving well, but by maximizing their income.
Third, you can invest smarter, to grow your money more through time. Chasing returns is dangerous, but smart investing will leave you wealthier than dumb investing!
These all have immediate parallels to your business, and the methods for increasing profits above.
And if you want me to work with you, 1-on-1, to increase your profits in your business…
Well, I’m not taking on any client copywriting work at this point, but I’ve just launched a brand new process called the Profit Breakthrough Private Consultation, which you can learn about at this link.
Yours for bigger breakthroughs,