HOW TO INCREASE PROFIT

In any business to increase profit these four actions are a must to do:

1.       Increase sale volume

2.       Reduce input cost /direct cost

3.       Reduce overheads

4.       Increase the price of your products.

Increase sales volume: The first thing which comes to mind when we talk of increasing sales volume is to increase our number of leads and the order conversion rate. There are different methods of increasing leads, primarily reaching out to more and more new customers which we call “untapped market”, and simultaneously make sure to do value selling.

Another important point is retention of our existing customers. Serve them so well that they themselves will create a firewall for your competition and additionally having a strong “brand promise” makes the customer loyal to your product /brand.

Reduce input cost/direct cost : this has significant impact on the profitability of an organization. Some of the input cost reduction strategies are :

1.       Negotiate well with suppliers in terms of price, payment terms and delivery schedules.

2.       Optimize supply chain by streamlining logistics, reduce transportation cost and improve inventory management. Implement just-in-time ( JIT) inventory to reduce holding cost of inventory

3.       Check cost effective alternatives for raw materials, components or services.

4.       Improve planning and forecasting to reduce waste, over production, and excess inventory.

5.       Standardize and indigenize

Some of the direct cost reduction strategies might be :

1.       Improve production efficiency.

2.       Reduce labor cost considering automation and outsourcing.

3.       Reduce energy consumption in operation

4.       Reduce packing and transportation cost.

5.       Implement total productive maintenance (TPM).

Reduce overhead cost : some of the strategies to reduce overhead costs are :

1.       Reduce cost of rent and utilities.

2.       Consider downsizing or subleasing.

3.       Cross train employees.

4.       Streamline operation

5.       Outsource non-core function

6.       Optimal use of Technology and software.

7.       Optimize cost of insurance and benefits.

8.       Waste reduction and recycling.

Increase your price : We must factor in the uncontrollable expenses due to inflation, rise in foreign exchange, spikes in transportation cost due to supply chain disruption . Customers should be well informed in advance regarding the same and convince them with proper justification.

Besides the above we need to collect our receivables faster by ensuring quality, delivery and correct documentation . On the other hand we need to lay down process which will have longer  payout cycles as we all agree that Cash is the King.