13 Changes Business Owners Can Make To Drive Profits Higher
Growing business revenue is top of mind for any business owner. It is what drives you every day and is likely the key reason you push harder than the day before to do better. Even with your continued efforts, you may feel like you are coming up short and not reaching your profit goals from month to month.
When your business’ revenue is the sole factor in whether or not you can put food on the table—not mention whether you can continue to make the business grow—it is imperative that you stay on top of your sales to ensure you can pay your overhead, as well as yourself, at the end of the day.
Below, 13 members of Forbes Finance Council share the one simple change business owners can make to increase profits today.
1. Consider life insurance.
Many times, cash reserves in a business are held in low yielding, safe accounts. You can put cash reserves in a permanent life insurance policy with 3-4% guarantees while satisfying your reserve requirements dollar for dollar. Structured correctly, your cash value equals 100% of your premiums paid, making the policy a positive, revenue-generating asset on your balance sheet on day one. - Drew Gurley, Redbird Advisors
2. Get vendor discounts.
Ask your vendors about getting a discount for paying upfront or before your payment is due. You could save 2-5% on the fees they charge for extending you credit. Paying your vendors early may also improve your business credit score, which can save you money on interest rates whenever you apply for business loans and credit cards. - Greg Ott, Nav Inc
3. Ask ‘Why?’ to your expenses.
Profits are driven by revenue and expense management. Assuming a semi-mature revenue stream, business owners need to ask “why” to their expenses and underlying processes. This includes a comprehensive review or expense commitments, related levels (users/usage) and legacy processes that can be automated. Incentivize employees to surface cost savings and process optimization, as they know it best. - Collin Greene, ShipHawk
4. Be prudent with your hiring.
Employees are usually the biggest cost for a business, and overhiring or underutilizing them will quickly eat away at your bottom line. That’s why you not only need to be extremely prudent about hiring, but you also need to ensure each existing employee is working to the best of his/her ability. This won’t only slash hiring costs, but it will also create a happier and more productive workforce. - Elle Kaplan, LexION Capital
5. Learn to delegate.
Delegate some of your tasks to someone else who can do the job, and focus on what you do best. For example, if you are in the business of sales and that is what you do best, but you also have to be involved with day-to-day activities of marketing, accounting, etc., you must find someone else who can take care of those activities so you can focus on the sales. - Dmitriy Fomichenko, Sense Financial Services LLC
6. Reconfigure management compensation.
One of the biggest account misalignments is owner/management compensation. Often, the equity payouts and the owner’s employee wages get commingled, and thus, it is difficult to actually assess true profit. Reconfigure owner/employee compensation to be reasonable based on the duties performed, and your profit margin will be more accurate. - Darryl Lyons, PAX Financial Group LLC
7. Assess key performance indicators.
The simplest change a business owner can make is to assess their key performance indicators (KPI). These show you how your business should perform based on past performance. So, the best way to increase profits is to implement metrics for the KPIs. Work with a consultant to help you make the necessary changes. - Justin Goodbread, Heritage Investors
8. Raise your prices.
Business owners often assume people won’t pay more for their manufactured goods or service. They’re generally mistaken. Unless you deal in a highly commoditized market, the consumers are not stalwartly encouraged by price. If you double your charges tomorrow, you may lose a portion of regulars—but, due to the price upsurge, you may also make up for it. - Chad Otar, Excel Capital Management, Inc.
9. Understand what your time is worth.
Understanding how much your time is worth can lead to breakthroughs identifying tasks you complete that may be costing you money. If you work 60 hours a week, and you earn $250,000 a year, your time is worth $80 an hour. Let’s say 10 of those hours are spent on tasks for which you could hire someone else at $30 an hour; you can save $500 a week, and now you have 10 hours to generate more income. - Alexander Koury, Values Quest
10. Manage what you measure.
Be sure to have forward-thinking metrics in place that you measure on a consistent basis—either daily, weekly or monthly. Know what the metrics mean and how to read if the measurement is indicating a positive or negative trend moving forward. Then manage those indicators with your team.Examples of key metrics to track include the Net Promoter Score and the Lifetime Value of a client. - David Gass, Anderson Business Advisors, LLC
Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?
11. Focus on driving revenue.
Many entrepreneurs and business owners are stretched thin, spending too much time on tasks that don’t generate revenue. The number one issue that this group has is lack of delegating. The most successful business owners we work with delegate, because they understand that their highest and best use of time is spent generating revenue, and everything else is a waste of their talent and time. - Michael Seltzer, Verite Group, LLC
12. Consider rebranding as a franchise.
The increasing trend of private equity groups buying into franchising, paired with a booming economy, should give small business owners confidence to rebrand their local stores as franchise locations. This offers serious cost benefits. In the short-term, a nationally recognized brand can help generate more revenue. In the long-term, opportunities to expand offer serious scalability potential. - Patrick Galleher, Boxwood Partners
13. Always be selling.
Everyone associated with your business should be a salesperson. By empowering employees to become sellers, you’ll see an immediate increase in your business’ profits. You can do this through continuing education and training, but it can start right away. When everyone is involved in web marketing, networking and in-person sales, your business will see increased profits. - Shane Hurley, RedFynn Technologies
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