Increase Profits #1: Five Key Areas Of Improvement
IIt’s very important to look outside of just cost reductions toward the improvement of your profit. Many business owners I have worked with in the past could benefit from taking a more expansive look (outside of the immediate box) at the opportunity and / or problem at hand.
The Nic Clark 5 Key Areas of Profit Improvement that will have the biggest improvement for your business are:
- Cost of Goods – reduce this area,
- Expenses – reduce this area,
- Prices – put them up,
- Conversion – improve conversion rate, and
- Leads – reduce cost of leads generation.
The two natural choices are:
- Cost of Goods – reduce this area, and
- Expenses – reduce this area.
The reduction of these two areas has an immediate affect on the improvement of your profitability. Therefore you should get a detailed (not summary) copy of your profit and loss statement. Once in your hands, you need to look at the larger valued line items under the Cost of Goods section and the Overhead (Expenses) section. Reduce these larger items by implementing ongoing monitoring of the costs, and the development of strategies for cost reductions.
The other areas:
- Prices – put them up,
- Conversion – improve conversion rate, and
- Leads – reduce cost of leads generation.
Have a ‘lesser’ known impact on the improvement of your profit – however a price increase of 10% can have a profound affect on your profit as it indirectly reduces Cost of Goods Sold and Overheads as a percentage of annual revenue.
Conversion improvement affects a lowering of cost per sale while a low lead cost also reduces a cost of sale and a cost of leads. Both of these can have a massive positive affect toward the improvement of your profits
