How can you increase the net profit in your business?

How can you increase the net profit in your business?

This is a question i get asked every couple of weeks. It is a good question because two of the main reasons we are all in business is to improve our lifestyle and make a healthy profit.

Over the years, many business owners have told me they have been working very hard all year to generate enough revenue to cover costs and make some profit but at the end of a financial year there isn’t enough profit to smile about. I know we can all relate to that story.

So what steps do we need to take to increase the profit in our business?

The first step is to know your critical numbers.

The critical numbers are the things that need to happen to increase your net profit, and they can be financial and non financial. Some financial critical numbers are:
• Knowing the sales figure you need to reach every month to generate a healthy business profit
• What your Cost of Sales figure and percentage are and should be
• What your Wages figure and percentage are and should be
• Know your monthly operating profit figure and percentage

Some non – financial critical numbers are:
• How many quotes you need to produce every month and how many you should be converting to sales?
• Know what source your leads come from – tally the numbers
• Know the break down of all your leads and what percentage fall into your target market

So what can you do now?

Spend some time looking at a profit and loss report and work out your financial critical numbers. If this is too confusing for you or numbers give you a headache (ask you bookkeeper to help).

If you do know your critical numbers, then I urge you to improve them.

As business owners we must continually analyse our critical numbers and make changes based on our findings to improve our bottom line. Healthy critical numbers will mean a healthy business.

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