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BizReport : Internet Marketing 101 : June 11, 2020


5 Ways Businesses Can Bolster Profitability

Profitability is a word that we're all familiar with. But if you're honest with yourself, you probably don't dedicate as much time to optimizing for it as you could/should. Are you ready to switch gears and make some changes?

by BizReport

5 Tactics for Driving Greater Profitability

A quick glance at the profitability numbers of thousands of businesses reveals just how difficult it is to be successful over a period of many years. The data reveals that 40 percent of small businesses are profitable, 30 percent break even, and 30 percent regularly lose money.

Regardless of which category you fall into, increasing profitability should always be a primary objective. Whether it's for growth or survival, more money means more opportunity. And with this in mind, here are some specific tactics you can use:

1. Spend Money to Make Money

Perhaps you're familiar with the saying that you have to spend money to make money. It's a pretty reasonable statement with plenty of supporting evidence to back it up. But what if you don't have extra capital sitting in a bank account waiting to be spent? How can you grow?

While entrepreneurs have to be careful with taking on too much debt - particularly debt that comes with any sort of personal guarantee - there's a time and place for leveraging small loans. It's all about how you use these resources and where the money goes.

For example, let's say you're going to take out a small loan and use the money to invest in paid advertising strategies. That's great, but have you taken the time to optimize the back end of this funnel? In other words, you can pay to procure traffic, but is there a high-converting landing page in place to capture them?

2. Target Existing Customers

It's far easier to upsell or cross-sell an existing customer than it is to gain a new one. It's also much more cost-effective and profitable.

As you grow your customer base, make sure you're gathering as much data as possible. Ask questions, listen to feedback, and seize opportunities to broaden your product selection so that you're able to meet more of their wants and needs.

3. Conduct an Expense Audit

There are two major variables within the profitability equation, yet most small business owners only focus on one. You can increase profitability by increasing revenue and/or lowering expenses. Why not emphasize both?

It's much more fun to increase revenue, but it's often easier to lower expenses. You just have to know where to look.
"Reducing business expenses and cutting costs are at the forefront of every business. And while owners and management are constantly looking for ways to contain costs and reduce operating expenses over 95% of them are still overspending," P3 Cost Analysts explains.
A good expense audit - one that examines everything from utility bills to merchant account charges - will help you uncover areas where you're hemorrhaging money and suppressing profits.

4. Follow the 80/20 Rule

Not every customer or account is worth your time. Follow the classic Pareto Principle and identify the 20 percent of customers who bring in the 80 percent of revenue. If an account doesn't fall into this category, it shouldn't be a huge focus. Likewise, you can eliminate some of the 20 percent of customers who take up 80 percent of your results.

5. Switch Gears With Hiring

"Full-time employees come with many unnecessary obligations for the business owner, such as payroll expenses, healthcare expenses, tax implications, and increased liability," entrepreneur Dane Kolbaba writes.

For many businesses, hiring 1099 contractors instead of full-time employees can save significant money. You only pay for the work you need, and there are no unnecessary payroll expenses holding you back. (As a bonus, it's much easier to find a good 1099 contractor than it is to secure a talented employee.)

Is Your Business Set Up for Long-Term Success?

Any business can pull a few levers, punch a couple of buttons, and generate a short-term profit. The bigger challenge is figuring out a way to establish long-term success. In other words, what decisions can you make today that will allow you to continually generate incremental gains that build up over time? If you can identify a handful of these systems, you'll start to see some real change.






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