Posted by Carol Mahamedi
June 29, 2020 | 5-minute read (881 words)
Although there is no one-size-fits-all advice that every entrepreneur can follow regarding profitability, companies that are working to reach a large profit margin can often use some tips. Check out the following best practices and strategies that can pave the way for the future growth of every startup business.
Best Practices to Boost Your Startup Profitability
Calculating profitability at various levels of your business journey is the best way to ensure optimal financial practices at every stage. Use the following guidelines to generate more profit for the future success of your business.
- Prioritize savings on office space and furniture – try to start your business at home if possible.
- Go low on investment or funding – utilize personal funds or reinvest your profit (some fixed percentage) in your business to avoid outside business financing.
- Maximize your cash flow – boost your receivables to improve cash flow, and ensure you maintain cash on hand.
- Be optimistic about the future of your company – be aggressive, but don’t try to expand beyond your means.
- Build an efficient website for your company, making it accessible for both desktop and mobile versions.
- Keep yourself updated with industrial, business and cultural data on the current state of affairs in your domain.
- Maintain healthy competition – be informed about what the competitors are doing so you can provide a product or service with a point of differentiation.
- Work on improving your employees’ productivity and efficiency – empower them to achieve their sales quotas.
- Check for consistent market demand - find your niche and become a leader in it.
- Automate your business – this can provide you with efficiency, which saves money.
- Improve the quality of your products – build a reputation for a great offering to fuel future growth.
- Beware of sales team discounting – apply effective marketing strategies, identify and solve pricing and cost issues.
- Fulfill customer demands on priority – provide good customer service.
Strategies to Boost Your Startup Profitability
There are many strategies that small business owners can use to reduce costs, increase profits and boost productivity. The following few techniques will help your business develop a strategy that leads to profitability faster.
Increase revenue while reducing expenses. To reach a profit, review your pricing strategy to ensure that your products and services are profitable and competitive in the marketplace. Increase your sales by streamlining productivity, reassessing marketing strategy and cross-selling — offer new services or goods that complement the current offerings.
Familiarize yourself with small business statistics. The best way to make a reliable business plan is to understand the current statistics of the industry and how other similar firms made it work. An effective business plan can help your company grow and thrive, and make informed decisions.
Focus on your winning market. Identify potential buyers or best customers of your products and services, and narrow your focus down to one market niche. Filter your leads to invest highest into those prospects, creating profit-generating customers for your company.
Focus on your winning product or service. Analyze which of your products or services have a maximum and minimum sale. Then, focus your sales efforts on max selling offerings. Ignore or phase out your lowest-selling products or reassess those products’ profiles later.
Improve the lead conversion rate of your sales team. Whether you're in an online sales business or you deploy a field sales force, your company's ability to turn leads into sales is key to increasing profit. Use effective marketing strategies from telephone to email to face-to-face meetings to help your sales team convert potential leads into customers.
Measure and track productivity. Introduce a system to measure productivity and profitability, and eliminate unnecessary activities or tasks that don't add value to the company. The system should also enable you to measure the efficiency of your employees.
Build a strong market presence. Create an online presence of your business through social media networks, including Facebook, Twitter, YouTube, Instagram and Linkedin. In addition, create a website and blog to connect with clients and make strategic alliances. Accreditations, licenses and certifications for your business can set you apart from your competition.
Track your time. Time is one of the most invaluable assets for a startup’s survival. Reduce your operating costs and increase revenue in as little time as possible. Thus, measuring your time and levels of productivity, you can estimate your future capacity for generating profits. It also provides you insights into the total time spent on each project, and can show you where to cut expenses or excess costs so you can increase profits.
Maintain a balance between profitability and growth. The success of a business will depend on finding a balance between profitability and growth. Maintaining harmony between the two will enable you to grow faster than your competitors do.
Have a strategic plan to achieve profitability. Prepare a strategic plan with 1-year, 3-year and 5-year goals that outline how your business will earn its profit. Define at least five key success metrics and implement and monitor a budget to achieve them. Seek input from experts and establish an advisory board of key clients. Conduct a customer satisfaction survey to improve and revitalize aging products and services.
By employing several of these strategies, you should be able to improve your profitability so your business can grow faster and earn more money along the way.