What are 3 ways to increase profit

What Are 3 Ways To Increase Profit?

By Russell Bowyer

There are two reasons why you need to know what are 3 ways to increase profit. These are your business has taken a downturn in profits and you want to increase them back to where they were before, and beyond. Or alternatively, you just want to increase profits to better your business and increase its value.

There are 3 main ways to increase profit of your business, which are: Raise your prices, increase your average transaction value and reduce costs. But profits can also be increased by selling more and through greater cost efficiency too.

Let’s explain each of these 3 ways to increase business profits in more detail.

Raise prices to increase business profits

Raising prices charged to customers will increase profits immediately, which assumes that everything else remains the same. What is assumed to stay the same is cost of sales and the number of customers, which will result in the amount of the price increase dropping straight to the bottom-line.

However, the reality is that unless you have a monopoly in your market, it’s unlikely that you will get away with raising your prices to customers, without the loss of at least a small percentage of customers as a result.

Many business owners fear raising their prices, for fear of losing customers. If this is your fear, please take a look at our business tool: Price Increase Calculator Tool. This business tool will show you:

  1. How sensitive your business is to increasing your prices.
  2. How many customers you could LOSE, as a result of putting your prices up, to be no worse off.
  3. The key numbers, before you commit to increasing your prices.
  4. The additional profit your business could make at the higher price levels, on the basis you retain all your clients after the price increase.

Increase average transaction value to increase business profits

Increasing average transaction value to increase profits is about selling more to customers on each visit, and is like the MacDonalds question: “Do you want fries with your order“. The benefit of increased average transaction values is you don’t have to raise prices to achieve huge improved profits.

The power of increasing your business average transaction value is totally underestimated by business owners. Step one is to play with the numbers first, and to see the impact on your business profits from small increments to average transaction values.

Once you have the information from step one of the exercise, step two is to work on ways to affect your customer’s buying habits, and to encourage them to buy more each time they visit your business. This can be your physical shop or store, or your online store too, or both.

The best way to do these calculations is to use our Increase Profit Software, which you can buy here: Increase Profit Software – on this page you’ll find a number of case study videos to show the power of increasing average transaction value to increase business profits.

Reducing costs to increase profit

For every Pound or Dollar saved on business costs, both in terms of cost of sales and overhead costs, should drop to your bottom-line and increase profits. But be careful, as cheaper products are not always a good idea, and this could cost you sales and it may have an adverse affect on profits.

When you look at each business cost, you should always consider that no cost is too small to worry about. Plus, when you assess each cost, ask yourself this question: ”If this cost is eliminated, will it affect customer satisfaction, and therefore business revenues with a consequence of adversely affecting profits?

If the answer is no to this question, you should consider cutting out the cost altogether, or make the proposed change. But if the answer is yes it will affect the customer experience, and consequentially affect profits, leave the cost as is.

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