4 ways to increase profits
What are profit margins?
Revenue is the amount of money a company brings in, and a profit margin is the amount of money from your revenue that exceeds your costs. That is, your profit margin is how much money you actually get to walk away with after a transaction is complete.
So, how can you generate a larger profit margin?
Strive for incremental growth
It’s easy to get ahead of yourself in business. You start thinking about your ultimate goal, and forget about all the little steps it takes along the way to get there. Instead of falling into that trap, learn to strive for incremental growth. It’s important to have an end goal, but it’s even more crucial to set small goals that you and your business can manage and track them over time. This allows you to make consistent progress and monitor how your business is performing. Check in with yourself – do you have the time frame and resources needed to consistently achieve your goals? It’s great if you want to make $50 million, but that doesn’t happen overnight. Set goals along the way to make $5,000, $10,000 and so on until you’re in a position to set your sights on your ultimate objective.
Focus on strategic innovation
There aren’t many companies who can say they honestly offer their customers something brand new. At this point, successful businesses expand on existing ideas, but they do it in a way that’s useful and appealing to their customers – they strategically innovate. Identify who your customer really is. Who is this person and what need do they have for your product?
An example of a strategic innovator is Netflix. Before the streaming service came along, people were happy to rent tapes at Blockbuster. Netflix saw how they could capitalize on this need for home entertainment, and found a way to make movies even more accessible for their target audience. They strategically innovated. If you’re able to do this, you’ll be leagues ahead of your competitors and can expect your profit margins to rise accordingly.
Create an incredible team
Developing sizable profit margins is partly about the service or product you’re offering, but it’s also about your team. Who do you have on your side that supports you 100%? Who works for your business that not only knows the company inside and out, but is willing to rave about your business and bring in new customers? Creating an internal culture of raving fans is just as critical as locating your target audience. When you assemble a team of people who are excited to work for your brand and spread your message, it becomes a hundred times easier to be successful.
Identify what’s not working
Take an objective look at your business – where are the gaps? Even if your company is successful, there’s something you can be doing to make it more profitable. Look at your expense reports, personnel reviews and current sales. What area is lacking? If there’s a noticeable gap, address it. Why did your business spend $10,000 on office supplies last year when nothing major, like copy machines or computer chairs, has been updated? Is there a market of customers you’ve left untapped? Assessing the current state, and possible shortcomings, of your business will help you create a better plan to move forward and generate larger profits.
There’s an art to creating revenue vs. profit, and it’s one that not everyone can master. Many businesses fail, but yours doesn’t have to. The key to professional success is in realizing how and when your company needs to adapt. Are there ways you can move forward that you haven’t considered? Is there a key leadership position you need to fill? By knowing what your business truly needs, you’ll create a sustainable, profitable company that you can reap the benefits of for years to come.
Master the art of generating profit
Learn the essential pieces to create the ultimate business advantage that will boost your company’s profit margins with Tony Robbins’ complimentary Seven Forces content series.