As Business Owner are you struggling to Maximize your Profit?
This is raison’detre of your business!
Maximizing Profit can only help you accomplish your original Mission and Vision.
But, is it that Simple!
An amalgam of Strategies is warranted to help you accomplish your business goal of — MAXIMIZATION OF PROFIT.
Be it- small start-up company or an international corporation- every business is desperate for ways to grow its profits.
Augmenting the scale of its business enjoys its top priority on agenda.
Having the right price is the prerequisite for the most basic and essential management function.
Accelerating the profit more efficiently than just a rise in revenue or sales volume engages the time and energy of Business Owners all the time.
An array of profit maximization strategies that a business may adopt goes a long way to create a positive ripple effect in its earnings in the long run.
Connotation Of Profit Maximization
Profit maximization is selling at a higher price than the cost. It is governed by the long-term perspective of business. It incorporates:
- Wealth development
- Societal factors
- Business networking capabilities
Maximization of Profit involves the generation of maximum output for a given amount of input.
Efficiency is the core rationale for Profit Maximization.
Profit Maximization entails efficient resource utilization under the competitive market environment.
Profit is the vital barometer for the success of any business.
“Money is multiplied in practical value depending upon the number of Ws you control in life:
What you do.
When you do it.
Where you do it.
With whom you do it”Timothy Ferriss
Fundamental Profit Maximization Strategies Warrant :
- Increasing Revenue
- Decreasing Expenses
How Do We Do It?
- Increasing Revenue:
- Boost the sales value by better product promotion or enhanced quality.
- Analysis of sources of revenue.
- Focus on boosting profits in high revenue areas of product/service.
- Up-sell to existing customers or clients.
It involves persuading them to purchase enhanced services or accessories.
- Diversify into selling a wider range of products or services.
- Develop new product lines after efficient marketing research.
- Improve employee productivity with rewards and incentives.
- Explore new customers and new markets.
- Enhancing quality of customer support services.
- Consider increase in the prices without declining sales.
2. Decreasing Expenses:
- Analyse the areas of expenditure especially the overheads.
- Decrease direct costs and negotiate cheaper rates/discounts with vendors for supplies, especially when buying in bulk.
- Make the manufacturing process more effective by:
- Breaking it down into individual tasks.
- Creating a production line structure.
- Improving business processes to reduce wastage.
- Adopt modern technologies for saving time and boosting production.
- Reduce inventory and implement stock control measures to streamline your business.
- Decrease indirect costs and make efforts to minimise waste in your business by training the staff.
- Reduce marketing costs by using low-cost marketing strategies.
- Decrease overheads and try to save energy from cheaper energy source.
- Benchmark main financials against similar businesses in the sector to ascertain reasonableness of payments being made.
First, have a glimpse of actions required to strategize for PROFIT MAXIMIZATION
- Understand your financials.
- Create a business map.
- Set realistic goals.
- Identify your bottlenecks.
- Do SWOT Analysis.
- Add value for your customers.
These actions shall involve a quick look at the following parameters:
- Covert one-time customer into recurring customer.
- Encourage referrals.
- Drop low performers from your product portfolio.
- Offer Upsell and Cross Sell on popular items.
- Delegate non-essential tasks.
- Expand your reach to broader market.
- Eliminate bottlenecks in your sales funnel.
Some Promienent Avenues For Profit Maximization
- Outsourcing acts as one of the best profit maximization strategies for businesses.
- A part of your work can be outsourced at a minimum charge.
- Search for strategic partners – Outsource Service Provider.
- Focus on your Core Function– on revenue-building projects with your full-time staff.
- Entrust your Non-Core Functions to Service Provider.
- This will reduce your operating costs and increase your productivity.
Here, the DICTUM is:
“DO WHAT YOU DO THE BEST AND OUTSOURCE THE REST”
B. Borrow Best Practices from Peers in your Industry
- Find out what works for your competition.
- Try to create a well-functioning business model of identical businesses in your industry.
- Adopt ideas and strategically re-orient them to fit your company.
- Repackage your product in a differentiated offering.
C. Educating Prospective Customers
- Creating a wide online presence is one of the most important profit maximization strategies.
- Digital Marketing helps substantially in boosting a business profit potential.
- Digital Marketing involves several areas such as e-mail marketing, social media, SEO, and paid advertising.
- Creating a website, joining Facebook and blogging are some of the vital tools that may render tremendous assistance in your profit maximization exercise.
- Focus on engaging your customers and retaining them.
D. Analysis of Profit Margins
- Assess the gross profit margin for each of the goods and services.
- Evaluate the gross profit margins for different business units, product types, suppliers, or consumer groups.
As a result, you can recognize low-margin/loss-making goods as well as profitable products.
Stop selling low-margin lines and concentrate on those which generate the most income.
E. Develop Efficient Pricing Strategy
- Fine-tuning the strategy on pricing can have a huge effect on your earnings.
- The pricing framework impacts your profitability.
- It is essential to correct the price of your product.
- Fix your pricing based on the benefit that the consumer derives from your product, rather than the cost.
- Use the Value Proposition, and determine how much value your customer receives from your product.
- Charge some fraction of USP as your price.
- Also, analyze the alternative products available to customers., and how much the customers would pay for each one of them.
- Diverse customers will pay different amounts, based on how early or late they purchase compared to other customers.
- A differentiated pricing plan and structure for these distinct groups of customers will mean dramatically higher profits for your company
- Be flexible on pricing with customers, through discounting an up-front charge or through a free or low-cost trial period to secure their commitment.
Prioritize your Profit Maximization Strategies
To make your business more profitable requires:
- Looking out for ways to raise revenue from sales.
- Reducing costs.
- Benchmarking your company to see where you can save money.
- Having created key profit drivers after detailed calculation, you can build strategies to grow them, without growing costs.
- Now jot down your goals and the corresponding plans for achieving them.
Chalk out execution plans for profit maximization strategies.
- Now you are ready to concentrate on hitting higher revenue goals for the most valuable products.
- You will be able to reconsider various aspects of your company.
GO AHEAD and create a roadmap for improvement.
Fundamental ingredients for the success of the business are very vividly crystallized as:
- Pursue the goal of Profit Maximization protecting the interest of shareholders.
- Render high-quality goods and services at a reasonable price.
- Inculcate the value of ethics within your structure.
- Implement sound Human Resource Management.
- Instil the concept of Learning and Earning.
- Construct customer satisfaction.
- Build vision-based values.
To survive and combat fierce competition for Profit Maximization
Remember Profits can be maximized by:
Rising revenue per unit
Reducing cost per unit
or a combination of both.