How to increase business profitability

There are many books and even more trainings that promise to answer the most important question of any entrepreneur - how to increase the profitability of the business. Not all the advice of even the most experienced businessmen are universal. Therefore, you should not look for a panacea or a recipe that will allow you to solve all problems with profitability as if by magic. However, a few tips will not be out of place to adopt many businessmen, especially beginners.

The loss-making of the enterprise or work "to zero" quickly bothers and when the first signs of negative profitability appear, the entrepreneur thinks about closing his brainchild. Business analysts say that more than 85% of representatives of small and medium-sized businesses do this in their first year of existence. At the same time, statistics show that often the reason for the lack of profit is the notorious mistakes of businessmen and entrepreneurs themselves.

A mistake in business planning can be expensive. If the author of the material is the entrepreneur himself, then most often all costs are taken with a big run. At the same time, an understatement of the estimated costs is no less harmful than an overstatement. Having planned for one degree of expenses an amount significantly exceeding reality, the entrepreneur holds these funds that he needs in another direction. For example, planning to launch a massive marketing campaign after a certain time, the manager can lay down the amount at inflated tariffs, while finding funds for current needs, such as payroll, from funds deferred to pay for the rental of premises.

When asked how to increase the profitability of a business, analysts often try to set up an entrepreneur to constantly review previous decisions, including financial ones.

The second common mistake of beginning businessmen lies in unjustifiably underestimating the prices of their services or goods. In an effort to demonstrate a democratic approach to pricing, entrepreneurs often forget about the turnover, which has only an indirect relationship with pricing. In addition, price reduction without the corresponding costs of marketing promotion can nullify all the efforts of the enterprise. If advertising was nevertheless given and provoked an increase in consumer flow, then its subsequent decrease may be due to the reaction of competitors who took the same step.

The third step that an entrepreneur must take in the struggle to increase business profitability is to consider labor productivity. The level of staff qualification, their skills and interest in increasing the turnover of the enterprise play a decisive role in the fate of the business. The simplest motivation for employees is financial interest. The waiters will be more welcoming and helpful if they know that they will be able to leave a tip for themselves, sellers will recommend more products for purchase if they are paid a percentage of the proceeds.

An additional way of motivation for employees can be continuous financial growth and an internal system for determining the best employees. These are the “Boards of Honor" of the best employees of the month, and the bonus of outstanding employees, as well as nice gifts for the holidays.

Well, and, perhaps, the main misconception that becomes a stumbling block to business growth is the lack of advertising. Of course, a successful product does not need to be promoted, but even the most profitable enterprise will sooner or later face a situation where, due to the marketing activity of competitors, the consumer forgets yesterday's favorite. In this case, of course, the work on marketing promotion becomes one of the main ones, but a competent approach is also needed, since good advertising is the one that brought 100 of the invested ruble.