21: How To Increase Your Profits Without Increasing Your Sales When You Are Self-Employed, A Solopr
21: How To Increase Your Profits Without Increasing Your Sales When You Are Self-Employed, A Solopreneur, Entrepreneur, Small Business Owner, Virtual Online Bookkeeper, Virtual Assistant Or VA
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Show Notes:
Welcome Back…Growing your sales and growing your profits are actually two totally different things. Today we are going to dive into understanding why you may not need to increase your sales when you are actually looking at growing your profits.
When you review your income statement, do you feel you have enough sales, but when you see your bottom line you start thinking you need to increase your sales so you can make more money? You just don’t think your bottom line is where it should be, and you are exhausted with all the marketing you are doing to bring in your current sales. If this is the case, there are ways you can improve your bottom line without feeling the need to make more sales, so let’s jump in.
You are going to need to have your income statement or profit and loss report when looking at how you can increase your profit without increasing your sales. Make sure your income statement is current and has been updated with all your transactions. You always want to start with complete and accurate information when you are analyzing your income statement.
Next, you are going to take a look at your gross profit numbers. This is the amount of profit you have after you subtract any of your cost of goods sold items, or costs directly related to the items you are selling. One of the first areas for you to start increasing your profits is to make sure you are not overspending on your cost of good sold. Is there any way you can reduce these costs? You may want to check with your suppliers to see if you can get a better price or a discount if you make payments to your vendors early if you have the cash flow to support this. Is there a way you could reduce your shipping costs? Take some time to really look at your cost of goods sold and if there is a way to reduce them, you will begin to see your gross profit increase which will increase your overall bottom line. One of your main goals in your business should be to always be working toward a higher gross profit amount.
Do you have a slow-moving product or service in your business? If so, it may be time to decide if you want to continue to keep offering this product or service. You may find you are spending additional time and money on providing this to your customers and if you stopped offering it, you could use these resources to focus more on the products and services that are your best sellers and stop spending money on what your customers are not interested in buying.
If you offer discounts to your customers, is there a way you can reduce these discounts? Rather than giving your customers a 25% discount, could you offer a 10% discount or eliminate the discount all together? By doing this, you would directly increase the amount of each sale. This may be something you could start testing out in different markets, but it could make a significant impact on your profits. Focus on the quality of your product rather than the discount.
Next, you are going to look at all of your operating expenses. Here you may find you need to dig a little deeper into each of your expense categories to find out what is making up each of your expenses. Look at each expense and ask yourself if it is actually needed for your business and if so, is there any way to reduce this expense. As you run your business, you will notice you add certain services, but many business owners don’t take the time to really ask if this is still something the business needs, or even if you are still currently utilizing that service. For example, do you belong to a certain association but find you haven’t attended one of their events for a year or even longer? Are the dues you are paying for this improving your business? If not, it may be time to stop paying those dues and increase your bottom line. Another example would be software. Have you purchased any software on a subscription basis which you are no longer using, or have you purchased a premium software subscription that you no longer need the premium version? By making sure you are only paying for the services you need you will increase your profits.
Is there a way you can purchase your office supplies or other business supplies in bulk? Are you utilizing larger discount suppliers to get the best possible pricing? Could you go paperless to reduce the amount of filing space as well as your paper costs?
Are you utilizing your real estate or rental space to the fullest extent? If you feel that your office or warehouse spaces are too big, consider looking for a smaller space. Downsizing your office could save you a considerable amount of money. If downsizing isn’t an option is it possible to lease unused space to another business or another option would be to consider if you actually need to be spending money on your rental or leased office space. Does your business actually need an office, or would it be possible to have your office in your home?
Compare your insurance premiums with other providers and make sure you are getting the best rates. You can always ask your insurance provider to match that rate, or maybe it would be time to make the switch to a more competitive provider. Would it be possible to consolidate your insurance policies to get a better bundled rate? It is important to make sure you have enough insurance to cover your needs, but equally important is to make sure you are not over-insuring your business.
Are your employees using their time efficiently? Payroll can be one of the largest expenses for a small business. Make sure each person you hire has a specific job description, you have set a reasonable time expectation for each project and the employee tracks their time to ensure they are meeting your expectations. If you find staff who could take on additional responsibilities, you could save additional funds you may be currently spending on outside labor. Make sure each employee is utilizing their time to the fullest and take advantage of each employee’s skillset. On the flip side, could you be outsourcing any tasks you currently have in house? Hiring a freelancer or virtual assistant could reduce your overall employee expenses.
Reduce or even eliminate any bank service charges and interest if possible. If you have funds available, you may want to pay down your credit card debt which will reduce your fees. Also make sure you are paying your bills on time so you don’t incur any late payment fees. These may seem like a small dollar amount, but if done repeatedly, they do add up. Another option, as mentioned earlier, would be to take advantage of paying your bills early if they offer a discount or savings and you have sufficient cash flow to pay them early.
Stick to your budget. If you set up a budget to ensure the profitability of your business, make sure you are sticking to it. Don’t overspend in any expense category and don’t spend money where you didn’t already budget for it. This will help your overall profit and keep you on track for the rest of the year.
Lastly, rather than marketing and getting new sales, is there a way you could increase the prices on the items you are currently selling to your existing customers? Even the slightest increase in your sales will directly increase your bottom line even if nothing else changes in your income statement.
Every small business is different, but one thing they all have in common is they all most likely have an expense they can trim down to increase their profit and bottom line. Once you have gone through your expenses, make sure you do this periodically throughout the year. It will be worth it to you since it really doesn’t cost you anything to take a quick look and it’s very possible you will be able to increase your bottom line without increasing your sales and this could be a significant payoff over time for your small business.
Make sure you grab your copy of the 5 Essentials For Stress Free Bookkeeping and if you are interested in starting your own bookkeeping business or are a virtual assistant who wants to add bookkeeping as a high-end service to your existing business, grab your Virtual Online Bookkeeping Starter Guide. Just go to www.FinancialAdventure.com or click the link in the show notes where you are listening to this podcast.
And, you know I’m going to ask…what’s at least one thing you will take away from this episode that will help your business succeed and grow your bottom line? If you need some accountability, join our PRIVATE Facebook community and post your action item, we’d love to support you.
