There are many ways to increase profits. Streamlining ‘how’ you do business is one of the most overlooked ways to reduce wasted time and save money.
Do you want to make more money? As a small business owner there are basically two ways to make more money. First, you could sell more stuff. Second, you could increase your margin. There are a million courses out there on how to generate sales. There isn’t much out there on how to increase profit margin.
Increasing profit margin, basically, means to make more money in the same transaction. If you sell a product for $10 that costs $5 bucks to make, your margin is $5. The service business is the same. If you charge $50 per hour, and your business costs $10 per hour, you are making $40 per hour in profit.
One way to increase margins is to simply raise prices. This is fairly obvious and easy to do. But stop and think about the consequences. Higher prices may end up reducing your sales in the long run. This would give you the exact opposite of your goal. So let’s look at some other ways to increase profit margins.
A great way to increase profits is by reducing the cost of doing business. There are hundreds of hidden costs in doing business. There are technology, facilities, and administrative costs to name just a few. You can reduce the costs to your business in a couple of ways. You could reduce product costs by finding lower cost suppliers. This is a great way to start. Chances are you have already done this as a small business owner.
The next step is one of the less discussed, and most powerful, ways to reduce costs. You need to look at “how” you conduct business. The “how you get things done” in a business is called a business process.
Business processes exist even in the smallest of companies. Processes are everywhere. These processes range from making sales, through to cashing checks. Most people look at changingwhat they do not how they do it! In a business much of your time is wasted not on what you do but how you do it. A personal example is in order.
Let’s take a look at one of my processes for finding customers. For some reason, I expect customers to magically find me. Then I expect them to send me email saying that they are interested in my services. Clearly these are unrealistic expectations. Even so, I check my email for customers every 15 minutes.
It is pretty easy to see the folly in that approach. To be honest, I’ve had a 0% success rate finding new clients by checking email. For arguments sake, though, let’s say that my email was generating me 10 clients a week. How often should I be checking email? Right now I check it at least 36 times a day. If I checked only twice a day I’d probably get more work done. Checking email 36 times a day is WAY too much time wasted. Wasted time increases the cost of doing business and is the result of a broken process. This brings to mind one of the first lessons about processes. A good process achieves the best results in a short time with the least spend. That is – a good process is effective and efficient.
Next time you are frustrated or bored with your business, stop and think about your business process. Chances are that “how” you are doing business is the cause. Change the process and save yourself time, money and aggravation.