Increase Your Profits With These Simple Tips
Episode 218 – The Local Small Business Coach Podcast
17 Ways to Increase Your Small Business Profits Tomorrow
As a small business owner, you are always looking for ways to increase your profits. There are short term and long-term solutions to growing profits and I thought we would take a look today at some of the quicker profit increasing actions you can tackle.
I do go into more detail in the actual podcast episode, but here are some of the highlights of the 17 ways you can begin increasing your business profits immediately.
While some of these items might get you a few hundred dollars, some will lead to thousands. Especially if you build upon the momentum you start.
So, if you are ready to start creating more profits, then grab a pen and let’s dive in.
QUOTE OF THE WEEK: “Profit is not the legitimate purposes of business. The legitimate purpose of business is to provide a product or service that people need and do it so well that it's profitable.” – James Rouse
Raise Your Prices
Probably the most obvious thing you can do is to raise your prices. But be cautious on this one. Yes, it will give you a quick win if you raise your prices. You can start to see the results tomorrow. If you raise your price by even a $1, that is a dollar more in profit if everything remains the same.
But here's the thing. There are pros and cons to doing this and I definitely do not think this is the very first thing you should do just to increase profits. There needs to be plan and reasoning to back up this tactic.
But I do think it's something that you need to look at to see if there are some easy wins that you can do. A pro is that you're going to have this bump right away. The con is you can catch your customers completely by surprise and if you don't do it the right way you actually could actually hurt your sales and hurt your profits because if you start selling less because of the price change that may not always be the best thing.
I take a deeper dive into when to raise your prices on this post/episode: When is the Right Time to Raise Your Prices?
Dive into Your Profit & Loss
The second most obvious place to look is to just grab your profit & loss statement. Just start going line by line and look for items that you can take immediate action on to start increasing your profits.
You might find $10 here and $100 there just by looking for ways to trim the fat and any unnecessary items. For example, you might have some reoccurring bills that you pay that you no longer use or no longer need.
Let's just say you subscribe to some industry magazine that you never have time to read. They're just piled up on your desk and not being read, costing you 20 bucks a month. Time to cancel that puppy and put that money back into the company.
You could have short term debt costing you interest each month that can easily go away. Maybe you are paying a bunch of things that you never use. Still have a landline phone you never use? Equipment rentals for things you never use?
All of these items seemed good at the time, but now they are just money going out the window. Look at what is behind the numbers, find stuff you are wasting money on. I go over a few more examples in the podcast episode. There is a link to listen both above and below this post.
Cancel them now! By the way, a typical business owner will find between $50 and $200 a month by just doing this simple search for things they never use. This can up to thousands of profit a year! By the way, this is a great exercise for your personal finances as well.
Scheduling / Travel Criss Cross
Are your gas expenses killing you? Well, these next to categories might be why.
Scheduling can be a pain but the time you spend coordinating your jobs will actually save you time and money. When you criss-cross back and forth, you are wasting gas, not to mention the time that could be spent on working in more jobs.
Just the other day I watched a business owner go back and forth between 3 towns all 30 minutes apart instead of just organizing his day to do one big loop.
I'm actually surprised how many people do this. And I think sometimes it's because we ask people when they would like to have it done versus trying to say hey these are the slots I have. And if you serve a large area, set aside days for certain parts of town.
I understand that in the beginning of your business, you are taking every job you can, but as you start to get better at your business you can actually start putting more profit in your pocket immediately by scheduling better.
Wasted Time / Not Having Everything
Another area that is leading to lost profits due to gas, time and payroll is, there are a lot of you guys that show up on the job site only to discover that you forgot something or you left something behind, so now you've had to go back to town, head over to Home Depot or somewhere else to get some part or whatever the case may be.
Every time that you do that, you are cutting into your profits.
Think about how many times you have wasted time, energy, money because you forgot something? Maybe you had a senior moment. Whatever the case may be, you weren't properly prepared for that job. Time to start figuring out why it happens more than it should?
Cut Down Waste
How often are you having to throw away stuff because you screwed it up or one of your employees made a mistake?
Maybe you bought too much & now you can't return it because you've already chopped into it or whatever the case would be. That's profit you're throwing out the window.
Waste is a big profit killer for any business that deals with food. I used to call it the “over scooping theory” when I had my ice cream shop. Where the kids would provide more ice cream in the scoop then what was called for. Thus, increasing my costs. Then, in turn, cutting into the profits.
I’m not saying give less than what someone pays for, but definitely, don’t give more than you should.
Look at your business and where you are causing waste. Where are your employees causing waste? Waste all comes out of bottom line profits, so always be looking for ways to improve your processes!
Doing Jobs Twice
This ties into our next one. Doing jobs twice. Maybe you are in a hurry to get to the next job, so you cut corners here and there. You don’t quite do it the way you need to. Next thing you know, you have to go back out and fix it or make it better.
When you are running around doing things twice, not only are you spending more on products costs, but you are cutting into your time for other jobs, thus, once again, killing your profits.
Eliminate Products / Services That You Don’t Need or Cost Money
Another area that can create more profit for you, is to look at eliminating products or services that you don't need or that cost you money. We all have some products or services that in the end we wonder why we even do them because they end up being more pain then they are worth and costing you money.
Now if they lead to more jobs, maybe even bigger jobs then I can understand why you keep them around. But if for the most part, if you have a product or service that ends up making very little money. Ask yourself, do you really even need to do it or carry it?
It is very common to find you have picked up products or services through time that no longer make sense. Time to just cut them out. This will make room for other items that have the opportunity to make you more money. Time to purge & eliminate the dead weight.
Eliminate Dead Weight / Unproductive People
Speaking of dead weight, time to look at your team. Some of you are carrying people on the payroll that are costing you profits just by showing up.
Those that know me, know that I am 100% pro-employee. I think they are the key to your success and your profits. It is our responsibility to make sure we hire the best. We train the best and we continue to develop the best. I put the ownership of our people's performance on ourselves. You need to do everything possible to ensure they can be successful and productive.
But what do you do when they aren’t? Poor attitudes don’t care. They cause waste, deliver poor service and in general, don’t even care. They are walking profit reducers. When people don’t care, they are less likely to watch the company’s back on profit.
When this happens, you need to cut the dead weight. You need to put the documentation in place, and you need to get rid of them.
I understand that this might be easier said than done at times. I get that in a tight labor market that you need people and getting rid of someone is just going to make your job harder. But is it worth your profit to hold on to them?
I could go on and on about this topic, but we will cover this in other areas.
Remember, hire the best, train the best and if they don’t rise up, only keep the best!
Pay Off Debt – Eliminate Interest Payments
I’m a big fan of being debt free. One of the perks of being debt free is the profit it keeps to your bottom line. When you have debt, you have interest on that debt. Interest that adds up.
While it might not seem like a lot, even $25 a month will cost you $300 a year in profits. And some of you have way more interest than that accruing each month!
Think about it, debt is just money you are in the hole for before you even make your first sale.
For example. let's just say you have a $100 credit card payment. You owe this, plus an additional $15 is being tacked on for interest. In order to pay for this, you don’t need $115 in sales, no, you need $115 in profit to breakeven which might mean your first $400 in sales is only for the purpose of paying off this debt. Is it worth it? I don’t think so.
So before you buy the next best shiny thing, let’s use retained earnings vs debt.
Don’t Buy It If You Don’t Need It
Speaking of which, don’t buy it if you don’t need it. Way too often we discover a tool, a piece of equipment or something we just have to have. Yet rarely do people do the math to figure out what they need to do in additional sales to breakeven.
If you think a $10,000 truck will increase your sales, do you know how much more you need to pay for it?
I used to go round and round with a friend of mine about her business because she would always come in and tell me about this awesome next thing that she wanted to get because it would help her grow her business. She was right. They would be awesome things and it would help her business, but she was nowhere near as efficient as she needed to be able to maximize that product or equipment.
It would end up a waste of money. Throwing profit out the door. Because until your business is ready for it does you no good. For my friend, she never did the math to see what she needed to do, and she rarely used it after getting it. A double whammy of lost profit.
Next time you see something you must have, just wait for 24- 48 hours, let the cool down period happen and then do the math!
By the way, I’ll be talking more about how to pay for stuff by figuring out the sales you need to breakeven in our Know Your Business Numbers Course
Feeding Jobs to Your Best Crews
Let’s say you are a landscaper with two different crews. Which crew gets your best margin jobs? If you aren’t feeding those to your best crews you might be missing out on profits.
These folks are going to do the job better, faster, with less waste. Every efficiency they have will just add to your profits by not costing any lost profit due to not caring or unnecessary mistakes or time waste.
By the way, it goes without saying, work on improving those poor performing teams. Every improvement will improve that bottom line!
ID Best Margin Products/Services & How to Drive Sales
This next one will require you to know the gross margin on each of your products or services. Because one of the ways that you can start making more money tomorrow is to make sure you are maximizing the sales of the items that you know you have a good margin.
What if you came up with a plan to sell more of the products or services that you have that you tend to make more money? Why chase the cheap jobs when you can focus energy on the ones that make more money?
To clarify, make more profit, not just more top line sales.
Never sell things just for margin, but if you have good solid products or services that you can help people with. I’m just saying, choose wisely what you focus on.
Happy Employees Care More
Happy employees make you more money. When your employees know you care and are behind you and your vision, they will do what they can to help you and the company be successful.
They will go over and beyond to make sure your customers are happy. They will do the job as outlined and will cut down waste or errs that lead to lost profits.
Some of the most profitable companies are those that take great care of their people. These companies realize that happy employees are engaged and care!
Ask yourself, do your people feel you care? Are you doing what you can to make them happy?
Challenge Employees to Find Wasted Money
Since your employees are going to happy, why not challenge them to help you find more profits? There's nothing wrong with them knowing your business. I did an episode on this in the past. I am all about our people knowing what goes behind every sale and where the money goes.
I used to have the kids that worked at my ice cream shop stand on a tile and I’d ask them how much they thought that tile cost me every single month. This 12 x 12 tile would get answers all over the place. They were shocked to learn that it was $40 a month. When I asked how many scoops of ice cream it took to pay for it, they would do quick math using sales. Then I explained it was the profit, not the sales that paid for it.
This teachable moment always led to them having a better understanding of what profit was and why it was important. Especially when they realized they were paid out of that profit.
Take the time to teach your team and challenge them to help you find profit. Heck put a reward to it. Even a gift card for great ideas can more than pay for itself if done right.
Fire Your Worst Clients or Customers
We talked about getting rid of dead weight employees, but what about firing a few customers/clients while you are at it?
Almost every single business has a customer that pops to mind as their worst customer. Don't believe me. Somebody popped in your head. There is somebody that you dread calling you or showing up. True? You know it is.
It could be another business owner who uses your services. It could be a customer who just drains you. They are the ones that when your phone rings You just stare at it. We know there's a headache on the other end of that call.
These folks cause you headaches, time and money. Odds are they are sucking the energy out of you. It's okay to let them go. Most of these folks are costing you profits due to wanting stuff free, discounted, redone, or just taking your time from other paying folks.
Time to let them back into the wild and become someone else’s problem.
Add On Items That Will Bump Your Margins
I love add on items. They often have higher margins and when done right, add value to the customer's purchase. A win/win for you both.
Big box retailers do add on items well. Think about your last trip to the grocery store, Walmart or Home Depot. Did you toss in something extra at the register? If you do, you were just sucked in for more profits for that company. Most of those items have a high margin rate and it was money they wouldn’t have had if you didn’t see them at all.
If you have a register, what can you put up there? Not a brick and mortar business? No problem. What are the items that you can add? What are your – “Would you like fries with that” item?
Something that adds value to the service you just provided.
I dive in deeper on this topic I love here: What You Can Learn from Big Box Retailers and the Power of Add On Items
Warranties You Can Add to Services
Ties to add on items are warranties. These can be almost pure profit for your business.
There is a reason that all electronics have a warranty add on. They know that you will replace that technology long before you try and fix it. We are a disposable society.
Even the other types of warranties rarely get used. Statistically, around 80% of warranties never get used.
I dive into this one deeper in this post/episode: Increasing Your Sales by Increasing Your Average Ticket
Check it out, I love this one for extra profits!
Remember, It Isn’t What You Sell, It Is What You Keep
As you can see, some of these items are quick hits to get you more profit today. Diving into your Profit & Loss can get you money tomorrow. So can improving your teams. Others might be part of a longer strategy.
The biggest take away is that there are profits out there for you to go grab. Even if you only pick one or two of the items we discuss, you will still put more in your pocket.
I’m on a mission to help local business owners like yourself get to a $100,000 take-home income. We do this one dollar at a time.
What are you waiting for? Go find you some money!
For more on this topic, don’t forget to listen to the podcast episode found below
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