As a business owner, you sometimes discover that even though you think you’re doing everything you should, you’re just not making the kind of profit you thought you would. This is not that uncommon and there are things you can check to improve your profit with just a few tweaks.
Know Your Gross Profit Margin
The first thing you should always know at the drop of a hat is what your basic gross profit margin is and then how that compares to the industry average. The formula to figure out your profit margin is calculated as follows: Profit Margin = Net Income / Net Sales. Once you figure that out, you can check it with industry standards.
Dig Deeper and Review All Your Prices
It’s also important to look at the prices of your products or services together and individually. Look at whether you’re making a profit off every single product or service you offer. If the profit is lower on certain items than others, or even at a loss, note that so that you can fix this problem later.
Increase Your Prices
It’s very important as a small business owner that you learn that you should not compete on price. It’s also important that you stop offering discounts without a strategic means to increase profit. For example, it’s okay to offer two or three price points with different value points, but don’t just blindly give someone a discount without a plan.
Analyze Your Expenses
Sometimes expenses can get out of control in any type of business. Take a look at each expense and determine whether or not you really need it. For example, are you paying for a project management solution but you’re not using it? Even five or ten dollars can add up over time and really cut into profits.
Test Your Advertising and Marketing
Often, the biggest problem with profits is poor (or lack of) advertising and marketing. Remember that advertising is paid, such as running a Facebook advertisement; marketing is something you do organically, such as content marketing.
Push Sales Harder
Once you realize what’s going wrong, you can push sales harder by making better sales pages, running more advertisements, focusing on content marketing more and so forth. If you’re not asking for the sale, you’re not going to get the sale.
Redesign Your Website
If it’s been a while since you looked at your website objectively, you may want to check it out. Sometimes changing just one thing such as a drop-down menu or pop-under or slide can make a huge difference in sales.
Rein in Time Suckers
This is something that can get in the way of profits for many types of businesses. Likely online service-based businesses more than others, but if you’re spending a lot of time on social media without a plan, you are eating into your profits. Set a time limit and only use social media when you’re done with your paid work.
If your business isn’t profiting as it should, even though you have good sales and are working hard, checking these things and tweaking them can make a big difference. It will just take a little extra effort to ensure that everything is working well together.