The Easiest Way to Boost Profits

Startups often make one of the mistakes of confusing making sales with being profitable, this most times leads to the misconception that the easiest way to improve profits is just to make a sale. The easiest way to boost profits is actually the simple yet overlooked solution-cutting cost. New business owners seem to think that business is about hearing the cash register ring all day, but determining how to grow sales is far more difficult. Let's say for example, your overall profit margin is 5 percent and you cut your cost by 5 percent, your profit will double. To get the same margin by selling, you would have to increase sales by 100 percent. Doesn't it seem a lot easier to cut back on the company expenses?

The first rule to any healthy business is to eliminate the costly slow moving goods or services that are low in profits. Imagine you own a personal care business with 25 percent of your inventory tied up in a product that's achieving insignificant sales. By getting rid of those slow moving items, you can put the money into merchandise with the highest turnover. If you have a day spa with body wraps that attract only a handful of clients per week, put more resources into facials or other services that will keep your appointment book filled. Savvy business owners have put this cost- cutting tactic into practice and have seen results. One of the common practices in business today is to determine the one thing that your business does best, become even better at it, and outsource absolutely everything else. Even a marginal product line that's not losing money is still draining resources, time and focus. This is a good time to review your product mix to determine if you need to cut the fat so your remaining products can be dramatically improved.

Your profit margin trend should be the single most powerful indicator of your company's health.

It's imperative that you know where your money is going and what your cost of doing business is. Develop a history of all your cost, and then look at those figures in percentages so you can establish realistic profit margins. It's impossible to track your progress without a starting point. There are many tactics you can use to increase your profits as a small business owner, but remember, it's not how much you sell, but how much you take home. When you're tempted to run yet another product promotion, ask yourself,"Is there an easier way to profits?" I bet you will find the excess fat to trim.

Anthony Clarke, business strategist with the Versitile Group, helps people earn more business income with less effort, by helping them provide more value to their customers. For a free copy of his special report "7 Highly Effective Tips For Creating Value" visit http://www.versitilegroup.com.