Growing a small business is a hard task. It takes a lot of hard work, sweat, and sleepless nights. With a drastic change in the policies, India’s economy has become more startup-friendly, encouraging the founders to begin one of their own. Everyone is busy coming up with a new idea that sells and satisfies people’s needs. But the one thing common in all of them is them pondering how to increase the profitability of their business.
Profit is a factor that dictates the health of a company by offering insights into its business. The success of a business is measured in terms of its capability to generate surplus gains. Thus, profit can also be called the scoreboard of a company.
For a startup to remain in the business, having a decent turnover is crucial. Even banks and other financial institutions are more likely to lend to a startup business if it demonstrates exemplary performance in terms of profit.
Here are 8 Tips to Follow to Grow Your Business’ Profitability:
Be Attentive to the Cash Flow
Having a great startup idea and a talented team is not enough to take your business to great heights. Maintaining the cash flow is equally essential; otherwise, you will put your startup in a dangerous situation. No matter how small your business is, it would be best to have all your payment timelines accurately outlined with detailed inflow projections. The projections help you forecast periods of low cash inflow and provide measures to keep the business running smoothly.
If you have little knowledge about maintaining a cash flow statement, do not hesitate to hire a financial expert. They will prepare projections on your behalf to help you focus better on the expansion of your company and its profitability.
Make Time for Marketing & Promotions
Investing time and money in marketing your products is the easiest way of increasing your company’s sales. A thorough product planning, test-marketing, and results-monitoring are essential to maximizing sales. Other crucial tips are conducting marketplace research to identify your target audience, running online and offline ads and promotions, paying attention to product pricing by comparing it to your competitors, etc.
You may also expand your distribution by combining direct selling, online selling, wholesalers, and distributors. For connecting with your audience, you may take advantage of the technology by leveraging social media platforms such as Facebook or Instagram. Social media has made connecting with customers easier.
All these are unique creative ways of lowering your cost of tapping into a new customer base.
Avoid Diversifying Too Early
After achieving success at the initial stage, many startup founders are quick to diversify into new things. For instance, a T-shirt printing business founder made a profit of more than 50% during the first two months. Assuming that he could handle all the operations solely, he diversified the business into accessories printing and hoodies printing. Soon, he was unable to focus on one process at a time and did not have enough funds to invest, which led to the downfall of his business.
From this example, you can understand that sometimes taking a whole new set of challenges may prove detrimental to the primary bread and butter business. Having too many things on your plate can quickly dilute your focus. So, it is better to focus on one thing at a time, especially during the early stages of your business.
Look for Lead Generation
Many times, huge funds are spent on people who do not even qualify as potential customers or influence your sales. Before spending your marketing budget blindly, create strategies to attract suitable and interested prospects for your business. If you have what it takes, you will soon convert interested candidates into paying customers.
Additionally, seek ways to increase your profit margin without compromising on product quality.
Setting Realistic Projections
Making financial projections at the beginning of your business may seem overwhelming and discouraging. That is why you will continually need to remind yourself that expenses are real and will escalate if you do not keep track of them. For this purpose, financial forecasts can help you develop operations and recruitment plans. It will also help to make realistic projections of the expenses you will incur in the coming time.
Avoid Spending Prudently
Spending a significant part of your budget on large equipment, inventory, business cards, and marketing materials may create cash flow blockage. But you can increase the profitability of your business by continually making intelligent decisions with money. If you are in the production business, look for flexible packaging options to minimize wastage and save money.
You may consider renting the machinery needed for a specific period only to avoid yearly depreciation and maintenance costs. Similarly, renting office space or co-working offices is an excellent way of saving. Additionally, sometimes it is cost-effective to outsource routine work or hire part-time employees instead of full-time employees.
You have to focus keenly on every single cost to make sure your business goes forward.
Negotiate With Suppliers
Negotiation is not always about acquiring goods at cheap rates. You could negotiate with the suppliers on the payment terms, delivery period, raw material pricing and quality, and payment dates. If you negotiate well, you may even get bulk discounts from the vendors.
For better projecting your product costs, have a contract with fixed prices of goods. Ensure that both the parties to the negotiating bid are satisfied. Additionally, exercise due diligence when collecting payments from your customers.
Make Everyone a Salesperson
From telephone to email, each of your employees has the opportunity to spread your company’s message or market its products. If you can get them motivated to sell by encouraging self-development, you will be on your way to creating a well-established organization. But remember to make an extra effort to represent your company, inside and out.
You can lure your team into promoting your brand by giving them bonuses and goodies. Printed pouches make for excellent and valuable goodies as they preserve your stuff while giving them a distinguished look. For buying printed pouches at affordable rates, visit logos-pack.com.
There are many things to consider when running a startup – budget, investment, marketing, etc. At the same time, it is crucial to focus on making profits, to keep the business running smoothly. Companies that are not profitable cannot stay up and face the competition without a constant influx of cash. That is why it is high time that small business owners change their traditional practices to focus more on profit.