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Increase ProfitEmploying an intelligent profit improvement strategy is essential for any business, retail or wholesale. Knowing how and when to increase your prices, where cost cutting measures could be introduced, and what areas could be outsourced to other providers are the cornerstones of good business practice. For a business to survive, grow and prosper in the medium and long term profits must be generated from the sources of revenue produced by the business. Profit per sale is essentially the difference between the amount of money earned from each sale made and the amount of money spent by the business in achieving each sale. Your business should be making a profit on every sale made. The more profit your business makes from each sale the more money you have to cover day to day operating expenses, pay yourself a higher personal income and re-invest in the business for future growth and development. To achieve these goals you need an intelligent profit improvement strategy. There are only two ways to increase profit per sale on any goods or service sold:
If you increase the price at which you sell your goods or services while maintaining your current direct costs per unit and overhead costs at the same level, your profit per sale will increase. This means that you will make more net profit from your current sales volume or you can make the same net profit with a smaller sales volume. When you increase your prices you will need to give good reason why, or keep prices below the "just noticeable difference" threshold. Cost reduction By reducing direct costs per unit sold and/or overhead costs while maintaining your current price per unit you can also increase profit per sale. This means that you will make more net profit for your current sales volume or you can make the same or more net profit with a lower price per unit and/or larger sales volume. Generally speaking, it is always preferable to increase prices rather than cut costs. Most small to medium businesses are already running very tightly when it comes to cost control. Further cuts in this area, while increasing profits in the short term, may have detrimental effects in the long term. iQuantum can advise you on price increase strategies and a profit improvement strategy for you business. Contact us today for information. |
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