3 mins read

How to Increase Business Profit in a Bad Economy

How to Increase Business Profit in a Bad Economy

Is your profit and loss report increasingly in the red? Many small to medium business owners and managers are watching the same sinking trend as they struggle to prop up business profitability. Here’s a powerful way approach to that problem that can revolutionize how you build your business.

Identify Key Factors: The first step in getting control of plummeting profits is identifying each key area of your business and recognizing how it affects profits. Many owners of small to medium businesses haven’t fully grasped the impact key business processes such as shipping and product pricing have on the bottom line.

This isn’t so hard to understand when you consider that the average small business owner wears multiple hats throughout the day. It’s hard to focus on a more profitable shipping method when you’re putting out fires in production and marketing.

Finding a good business planning tool is the first step in identifying what’s shrinking your profit margin. Easily understood online business tools are coming of age as small business owners race to maintain profitability. Find a business analysis tool that’s customizable for your situation and start feeding it information about how your business runs.

Analyze The Results: Once you’ve created an online snapshot of your business operation, it’s time for some analysis. Which business processes have shown a sharp increase in expenses, without adding income to your bottom line? Which departments are profit-neutral but play a key support role for other profit centers?

Here’s an example of how a business owner might analyze her key business factors: A mailing services firm finds her pricing is no longer competitive, but that they still lead the local market in delivery time. The loss of business to the competition has the owner wondering if employee layoffs are inevitable in order to bid more competitively.

With the help of an online business analysis tool, she documents a steady creep upward in packaging expense over the past two years. She also sees that the cost of fuel, vehicle maintenance and uniforms are primary factors in the firm’s declining profitability.

Make Decisions Based on Reality: With these trends well documented, this business owner can begin to make decisions about her business. Rather than immediately reducing her workforce, she uses her business productivity improvement system to project the impact of making changes in these areas.

Could she, for example, realize savings in uniform, fuel or vehicle maintenance expense by securing bids from other vendors? Is the increase in packaging expense really driven by the paper manufacturing market, or are other suppliers offering better pricing?

With those savings in hand, she can determine how much decreasing the rates she’s charging will impact her bottom line. The key is deciding which modification in the way she does business will improve business profit most significantly.

The need for this deliberate review and reflection about business profitability might seem obvious to some, but many small to medium business owners find it difficult to stay on top of every aspect of their operations. That’s the beauty of employing an intuitive business profit increase system to analyze key business factors.

Doing so removes the guesswork and saves you, as a business owner, time better spent developing new products and marketing them. That, after all, is the way your business will remain competitive in today’s challenging marketplace.