We've all heard that only two things effect business profitability, Increase Revenue or Decrease Expenses. That's it. So when you've done all you can to achieve a breakeven position, how do you make an even greater impact and bring forth the pleasure of profits? This is when detailed analysis of your product line becomes important.
AMOA Financial points clients toward a sweet spot which already exists within their business. That is their high margin products. One mistake many start-ups will make is building a business on low margin products and not changing their direction before it is too late. If you find yourself in this predicament take action with determination!
High margin products can leverage new profits when approached systematically with purpose.
Here are 3 simple steps to get there.
Review your products and determine which items cost you the least money while making you the most money. Sometimes this is fairly evident, but if you run a complex operation you may need some help. (Of course we can help you with this determination.) You may be surprised to find your high margin items are products you rarely focus on or do not considered a mainstay within your business. Stay flexible and move to #2.
- Ask yourself a simple question. How can I sell more of this item? If this were the only thing you sold, how would you get the attention of the masses? Again you could be surprised to find this item is relatively easy to sell or you may find you have to revisit parts of your business to make the shift. Even still, this is better than failing and better than never reaching a profitable position. This leads to #3.
- Make a shift in your business. To get serious about profits is to get serious about redefining your path. Clear your attachments to your vision and be open to carving out a new path just like you did when you boldly started your business. A change like this could require adjustments within internal operations, marketing platforms, relationships with vendors and the public.
- DO IT. Make this effort a new part of your daily focus and plan to see specific changes in revenue over the next quarter. Use your financial reports provided by your accountant and bookkeeper to monitor trends. Also watch for changes in fixed cost and labor. This may be something to consider going forward.