3 ways to maximum profit

There are only 3 ways to maximum profit – cut expenses, sell more products or increase the price of your product.

The primary reason for any business’s existence is PROFIT. If a business does not produce a profit, it cannot justify its existence, nor can it carry on doing business in future. A business needs funding to take care of operation expenses – and unless you want to keep funding it from your own pocket, or upset shareholders, you need an income that will at least cover total expenses. There are 3 ways to maximum profit in your business.

Thus – total revenue must exceed total expenses in order to generate a profit. Simple, isn’t it?

If your business is not profitable today, it merely means that either your expenses are to high OR that your revenue is not high enough. Increasing revenue and/or decreasing expenses should then be your primary focus.

Only 3 options to maximum profit

So what are the ONLY three things that you should address?

Cut expenses

Decreasing expenses is a very effective way to will increase your profit (or put another way – decrease your loss). Example: Cut your total expense by 10%. Examples – find new suppliers of stock, stationery, insurance, outsourcing, etc.

	Current	Future	Change
Total Income (revenue)	R40 000	R40 000	0%
Total Expenses	R30 000	R27 000	10% –
Profit	R10 000	R13 000	30% +

NOTE: In the example above, a 10% decrease in expenses will lead to a 30% increase in profit.

Increase selling price

When last did you increase your selling price? It is true that customers “expect” yearly price increases, at least in line with inflation. However, many small businesses believe, wrongly, that they will lose sales if they increase their price. It is suggested that you have a yearly increase of at least 5 – 10%.

	Current	Future	Change
Total Income (revenue)	R40 000	R44 000	10%
Total Expenses	R30 000	R30 000	0%
Profit	R10 000	R14 000	40% +

NOTE: In the example above, a 10% increase in the selling price will lead to a 40% increase in profit.

Increase sales volume

Is it really too optimistic to believe that you can increase your sales by at least 10%? How about promotions, sending emails / sms to existing customers, finding a new market, getting customers to use your product more? There are a myriad of marketing strategies that will enable you to increase sales by at least 10%!

	Current	Future	Change
Total Income (revenue)	R40 000	R44 000	10%
Total Expenses	R30 000	R30 000	0%
Profit	R10 000	R14 000	40% +

NOTE: In the example above, a 10% increase in sales volume will lead to a 40% increase in profit.

In summary:

	Current	Future	Change
Total Income (revenue)	R40 000	R48 400	10% + in sales AND 10% + in volume
Total Expenses	R30 000	R27 000	10% –
Profit	R10 000	R21 400	114% +

What will the result be if we can affect ALL the above changes in our business? A 10% increase in sales volume AND a 10% increase in selling price AND a 10% decrease in expenses will lead to a 114% increase in profit.

Let Prof Gary help you maximise profit in your business. Contact him today!