In a tight economy, businesses of all sizes look for ways to increase their profits. Some people concoct elaborate marketing plans and strategies to tap into new markets, while others downsize their current employee base to save money on salaries and benefits. Fortunately, you don't have to waste money on outside consultants or cut your current staff size. All you have to do is follow three basic fundamental laws of business to increase your current profits.
Increase the Costs to Customers
You can increase your profits by simply increasing the overall costs for your customers. This profit-increasing strategy can be implemented in several ways. For example, you can keep the same markup percentage, or difference between what the product or service costs your business versus what your clients pay, but simply raise prices. If you resell products you buy from wholesalers, you could seek new vendors with less expensive products but keep your original pricing structure for customers. This would raise your gross margin percentage, the difference between revenue and cost, and make the sale more profitable for your business.
Increase Your Customer Base
Become more profitable by gaining new clients. You can use many different types of strategies to attract new clients. For example, you can offer a minor discount on products or services to attract new customers. You can also set up a referral program that encourages current customers to refer new clients to your business. Look for ways to differentiate your business from similar companies in the area, such as personalized customer service or guaranteeing your work.
Sell More to Current Customers
Increase profits by simply selling more products or services to your current client base. You may be able to achieve this by offering volume discounts. For example, a retail store prices T-shirts at $10 for one item, or $17 for two items. In reality, the T-shirts only cost the retailer $3 per item, but the customer ends up spending more than he originally intended because he wants to take advantage of the perceived discount.
While there are three proven ways to increase profits, some businesses look for other ways to make more money. Some seek ways to cut internal costs, such as setting up procurement processes designed to save money on office supplies. Others evaluate their current client database and "fire" customers that take up precious time and energy each month, but do not spend that much overall.
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