The aim and objective of most businesses (if not all) are to make a profit. However, making a profit in your business is not that straight forward, you will need to put some strategies in place to excel.

The famous question “How do I increase my profitability?” is going to be answered in this post along with some other useful tips. Here are some of the talking points:

• Prepare a strategic plan with 1-year, 3-year, and 5-year goals
• Change Operating Procedures
• Maximize Your Cash Flow
• Streamline Management Costs
• Create an “exit” strategy now
• Increase pricing
• Make Everyone a Salesperson
• Raise the Marketing Bar
• Stay Visible and Connected
• Listen to your employee’s complaints about tedious tasks

You have probably heard about businesses that have a huge customer base, but they have to shut down due to financial reasons. This is because they do not have a strategic plan that outlines how their business will achieve profitability.

Then when their business is unable to handle their basic business operations or expand their operations, they are surprised as to why they have financial issues.

We do not want your business to be one of those businesses that cannot earn a profit due to poor planning. It is best to learn the tactics that can be used to develop a business that is very profitable.

Also, it is surprising to know how many business owners don’t know the difference between profit and revenue. They believe that just because money is coming into their business, they are actually making it. Money coming into your business is not yours until expenses have been paid.

Read Also: 17 Reasonable Ways for Entrepreneurs to Save Money

Once these expenses are paid, the remaining is the profit. Many businesses break even or are in debt after their expenses are accounted for. There are business owners who do not even know this is occurring, they just pay out money and go about their business.

Here are 10 simple strategies to increase your profits and profit margin. Also, note that they work, only if you put them into practice.

20 Reliable Tips to Help You Increase Your Profits

1. Prepare a strategic plan with 1-year, 3-year, and 5-year goals

A Business takes time to develop, therefore, you need to create a strategy that has a five-year outlook at the minimum. Each year needs to define how your business will grow over the years.

As your business grows over the years, it will become more complex, which means your financial plan needs to grow with your business.

This means your strategy needs to not only define how you will make money but also how you profit the majority of the money you generate. Constantly review your strategic plan so that you are aware if the results you produce match your set goals.

2. Change Operating Procedures

You need to generate more sales while reducing expenses. To increase your sales, try cross-selling—offering new services or goods that complement your current offerings.

For example, a chiropractor might also sell vitamins. Another operational change that can increase profits is incentivizing new customers to try your product with specials deals, discounts, or short-term giveaways.

On the flip side, to trim expenses, try auditing your administrative functions. Are there routine tasks you could afford to outsource or eliminate to save money? Would it be more cost-effective to hire part-time help instead of a full-time employee to do some of these tasks?

3. Maximize Your Cash Flow

One of the best ways to achieve a stable cash flow is to offer pre-paid retainers or ongoing payment plans for your clients. For example, instead of a one-off consulting contract at $125 per hour for a full day, tweak your offering and give them a discounted 20-hour retainer plan at $100 per hour.

While your hourly rate would be less in this case, you’ll be billing for a greater total dollar amount, and locking your client into a longer-term arrangement.

At first, this may not seem as lucrative, but it establishes a relationship and keeps the door open for additional work. Maintenance contracts for service-based businesses are another way to create a new revenue stream.

4. Streamline Management Costs

Are your employees efficient? How many customer leads do you get? How much are you owed in accounts receivable? Questions like these need to be answered immediately, and to do so, you need to automate your business.

Create a system for employees to access and add data, keep all information updated and synchronized, and be sure to build in back-office administrative time into your project fees, hourly rates, or ongoing charges. Automation allows your business to run smoothly and will help a scaled-down workforce accomplish more back-office work.

5. Seek input from outside your organization

Consultants are professionals who can help you see things in your business that you are too blinded to see. When you are within your business, it is hard to separate your vision for your business from its actual reality.

Therefore, outside advice can help you discover your business’s weaknesses, and how to improve these shortcomings. Do background research before hiring a consultant. You want to be sure you hire someone who can deliver on their guarantees and for their high fees.

6. Create an “exit” strategy now

Even if you are building a generational business, you still need to determine how ownership will be handed over to members of your family.

An exit strategy makes the sale of your business or transition of your business an easy initiative to accomplish. This takes out the stress of the process, so you are not scrambling to make it happen when you are ready to exit from your business.

7. Increase pricing

This is the easiest answer for many small companies, especially those who have been in business for a while. Most businesses set their prices when their business was first launched, and since they were so hungry for business, they set pricing levels low.

Over time, the business likely only made nominal increases to pricing every few years, but rarely did the owner ever sit down and fundamentally rethink his or her pricing model. If it’s been over a year, time to look at it again.

8. Make Everyone a Salesperson

From telephone to email to face-to-face meetings, every employee has the opportunity to spread your company’s message and engage in potential sales-generating behavior. Everyone needs to pitch in to help by cutting costs, selling, networking on the web, marketing, and more.

If you can get your employees invested and motivated to sell your message by encouraging self-development through roundtables, conferences, lunch meetings, and webinars you’ll be well on your way to creating an organization that is built around increasing profits.

Remember, it pays dividends to reward your employees that seek continuing education, or who make an extra effort to represent the company inside and outside of work.

9. Negotiate and get competitive pricing on your merchant accounts

This one tactic will likely yield an extra .25-.5 percent to your bottom line with very little effort. (Think of what this means. If you have a 15 percent operating profit margin, a .25-.5 percent increase to your dollars of profit is the equivalent to selling 1.67-3.33 percent more.

What does this really mean? If you have $10 million in annual sales with a 15 percent operating profit margin, then a .5 percent decrease in your merchant account fees adds the same profit to your bottom line as selling an additional $330,000! Not bad for what will likely take your controller 10-15 hours of her time to negotiate.)

10. Raise the Marketing Bar

Before now, networking used to mean cocktails and handshakes. Now, it is all about immediacy. Give your business an instant presence through online networks including Facebook, Twitter, YouTube, Instagram, and LinkedIn.

Set up group meetings, sales presentations, and special promotions using webinars. Offer tutorials, demos, or new certification sessions as webcasts or podcasts for immediate download.

Measure all of your marketing efforts to see which ones are cost-effective. You can do this with a Customer Relationship Management (CRM) software solution linked to your accounts receivable system.

Read Also: 6 Essential Components of Any Successful Side Hustle

11. Negotiate hard on Deals

Take the time to plan out your negotiation strategically. Create a competition for your dollars. Create a list of concessions you want, with extras for you to trade-off. Research the market to better understand the best deal you can expect.

Even hire an experienced negotiator to help you make the purchase on the best price and terms you can. If the asset you’re buying for your business is large enough, the ROI on your negotiation work can be immense.

12. Consider buying “off-the-shelf” versus designing or developing a tool

Unless you are in the business of designing exactly those types of tools you’ll almost always find your estimates of the cost to build from scratch are hundreds of percent too low.

Plus, you won’t have the install base to update that tool, for example with later software releases, at a cost anywhere as close to a third party company that can amortize these ongoing waves of new versions over a much larger user base.

13. Stay Visible and Connected

Accreditations, licenses, and certifications for your business or individual employees can set you apart from your competition. Take your reputation online, using social media, your website, and a blog to connect with clients and make strategic alliances.

Use advertisement sharing with complementary businesses, find ways to leverage referral selling and take advantage of affiliate marketing tools to drive new customers to your site. Eliminate stale, ineffective alliances that may be dragging you down.

14. Renegotiate with your landlord

You’ll never get what you don’t ask for. Create clear options for other space you could lease and have a heart to heart with your landlord about reducing your lease rate. Even if they say no you can always give them a fallback request to give you an option to extend your lease without an increase in rent.

15. Establish an advisory board of key clients

Your best clients are the ones who will want to see your business grow and be successful. Allow these clients to point out where the strengths and weaknesses lie within your business.

This will help you understand how to improve your business from your client’s point of view, which allows you to develop a product or service that will be in great demand from your target market.

16. Implement and monitor a budget

A budget is what helps to keep your expenses in control. Your budget needs to be followed closely in order to ensure that your finances remain in order. Follow your budget strictly and only go outside of it when it is beneficial to your business generating more money or keeping more money.

Your budget also needs to be revisited quarterly, if not monthly. This will help your budget remain aligned with the growth of your business.

17. Determine up to five key success factors for your business

Your business will need to operate under five principles that will determine its success. Once these principles are determined, you will need to monitor these factors weekly to ensure that your actions align with them.

These key factors should focus on growth and prosperity. Sales and expense controls should definitely be two factors that are also within your success factors. Without these two factors, you will find it hard for your business to be profitable.

18. Feed your winners; starve your losers

This includes your marketing activities, your sales force, your general staff, your company initiatives, your reporting, etc. So cut your losers, and feed a portion of the saved time and money into your winners. This will greatly boost your profitability.

19. Revitalize aging products and services

Just because your products and services are not as popular as they once were, it does not necessarily mean that you have to get rid of them immediately.

See if you can find ways to re-purpose their old uses in order to attract new markets before disposing of them. If you are able to re-purpose their use, you now have a new stream of income from a product or service that was once dormant.

Read Also: 5 Decisions That Could Change Your Business

20. Listen to your employee’s complaints about tedious tasks

Your employee complaints are an opportunity for you to take a look at their workload to see if they are focusing on the task that can help your business to grow or just busywork.

If it is the latter, you can outsource this work to other companies, so that your employees are strictly focused on making money and maintaining the operations of your business.