Increase Your Profit Margins
One way to make your business more profitable without going to too much trouble is to reassess your products in terms of profit margins. It’s amazing how many small businesses manage with tiny profit margins and seem to be permanently offering discounted products and services — it makes you wonder how their businesses manage to keep going. After all, the purpose of being in business is to make money and without a reasonable level of profit, it is difficult for any business to survive, let alone build equity value for the future. The bottom line is — your business needs to be profitable and a successful business should be making money, so how do you make sure that your business will bring in a decent profit?
Take a step back
Sometimes business owners get so bogged down in the day-to-day running of their business they forget to take a step back and reassess where they are now and how they want to take their business forward. Successful entrepreneurs always have an eye on the horizon and a solid plan for their business.
The first thing to do is to assess how your budget looks right now. You should be completely objective about this as it could mean the difference between success and failure. You should make it a practice to continually check your accounts and produce cash flow forecasts based on your current level of business. Make sure you are realistic in your forecasts or you could be setting yourself up for a fall. Check that your current level of profit is sufficient to meet all your costs, overheads and financial commitments over the next year or so.
Once you have had a realistic look at the big picture where your business finances are concerned, you should start looking at ways of increasing your profits starting by reducing your costs. Are you spending too much on premises or staff? Is your marketing strategy genuinely effective and bringing in business, or are you wasting your money on unnecessary advertising? Do you really need to offer discounted prices? Have you looked at the prices your competitors are offering to see where you fit into the marketplace?
Check out how much competition you really have — if you are in a cutthroat area of business where there is literally a price war going on, you may just be better to quit now and find a more profitable basis of your business with different products and services. You have to be tough to be able to survive the gorilla tactics of some of your competitors. The important thing is to take an honest and ruthlessly objective look at your business — get professional advice if needs be but if you find that your business is not producing optimal profits, you are in a great position to either make the necessary changes to turn things around, or start again with a different product or a new business. It’s better to know where you stand and pointless flogging a dead horse!
How profitable are your products?
It can be a struggle for any business to survive when they are dealing in profits with tiny profit margins. This can happen in all sorts of areas but particularly in drop shipping when there are too many middlemen and even some affiliate products that only provide small commissions. To make a reasonable profit, you should only be dealing with highly profitable products, otherwise you need to work on a strategy to sell in bulk.
You may as well give your tiny margin products as freebies or bonuses providing they are cheap for you to buy but really, you should be looking to sell products with a least a 200 percent markup. That means if you buy a wholesale product for $20, sell it for $60 and make $40 profit, which equates to a 500 percent markup. Even better, produce a product for $5, sell it for £105 and make a 2,000 percent markup. It may take some thinking through but once you find these sorts of products, you’ll never want to bother with paltry profit margins products ever again.
So how can you find products offering these sorts of amazing profits? Information products such as digital books, reports, manuals and courses commonly produce these very high profit margins. There are also plenty of other downloadable products such as software, pictures and so on that can command high prices for a very small cost. The great thing about downloadable products is that they provide an item with a high perceived value that costs very little to produce. They can also be delivered automatically to your customers 24/7, which saves you a great deal of time and effort.
So try to introduce some highly profitable products and also look at ways you can provide profitable services as well such as consultancy. You could also leverage your business to make big profits by franchising or setting up a chain of businesses which can be managed by other people.
With a little market research and an honest appraisal of your business, you can start bringing in amazing profits.