Your sales revenue can be a key profit driver in your business. To increase your profitability, you should develop a strategy to grow your sales. You can look at things like:
- increasing your prices
- finding new customers
- selling more to existing customers
- offering sale promotions to boost the volume of sales
- developing new product or service lines
- selling in new markets
You should examine the products and services you offer, your target market and your pricing strategy to see if you can make improvements.
Review your product or service pricing
It’s a good idea to review your prices often. Changes in your marketplace could mean that you can increase prices without losing sales. However, you should test any price rises before you make them permanent.
Use the Pareto principle to target the right customers
It’s not just your prices that affect your profits – the type of customers you’re selling to can have a big impact. You may be able to increase your profit margins by targeting your most profitable customers, even if you lose the less profitable ones. To find out the most profitable customers, you can apply the Pareto principle.
Often known as the 80/20 rule, the Pareto principle proposes that around 80 per cent of your profit is gained from 20 per cent of your products or services. Similarly, 80 per cent of profit is often also gained from 20 per cent of customers.
Review your product and service offering
If you offer a range of products and services, examine the profit margins of each. You can work out what individual products cost by you using activity-based costing.
When you look at your current offering, you may find that some products do not deliver good returns. Consider concentrating your efforts on your more profitable offerings.
Carry out regular market research to identify products and services that are in demand. Keep up to date with market trends, as this will help you to identify new opportunities to generate profits.