There are many different ways to increase business profits, but when you reduce the various methods back to basics, they all fit into the following mathematical equation:
Profit = Income – Expenses
This means if you want to increase your profit it’s simple, you either need to increase your income or reduce your expenses. Wouldn’t it be fantastic if it were just that easy? The truth is, if it were that easy every business would be generating massive profits and I would be out of job. We all know it’s not as simple as this but why?
Many businesses owners are already generating income the best way they know, and are already mindful of their expenses, doing their very best not to over spend. So why is it that even by doing all this, many businesses are still not producing these increased profits everybody speaks so much about?
One reason is competition. With globalisation increasing and the reduction in barriers to entry for many, competition for small to medium businesses today is at unprecedented levels. Many existing businesses often feel forced to sacrifice their own margin to compete with new entrants to their industry. This results in decreasing income and increasing expenses which is a guaranteed way to decrease profits.
With all this pressure on margins and pricing, today’s businesses have little choice but to operate smarter. Decreasing costs may not be as simple as going through your profit and loss statement to identify possible areas to reduce expenses (although this is often a good place to start). Reducing or eliminating waste is an excellent way to reduce expenses and hence increase profit.
Waste is often thought of as being the scrap that remains at the end of a process. In reality, waste can include instances of using or expending something carelessly, extravagantly, or to no purpose. This means waste can be included in all stages of an organisations processes or procedures and can often go unnoticed unless people actively go searching for it.
Once identified, reducing or eliminating waste will absolutely result in increased profits.
Join me on 21 September when I will be demonstrating an excellent tool we use to identify and reduce waste within organisations. The evening will include detailed information about ways to improve efficiency in your business and how to increase your business profit whilst applying the methods to a practical case study throughout.
If you’re unable to attend on the evening or if you would like to discuss how we can help you do the same for your business please call me today.
Written by Chris Morris