Each new year brings with it resolutions, and many of these are hinged on slimming down. But, with South Africa’s economy going through a difficult period at the moment, it is understandable that many small businesses will want to trim the fat, too. 2016 will likely see many businesses going for a leaner, meaner approach, which is great. It is important to remember, however, that slimming down costs should ideally accompany an increase in revenue when it comes to profitable practices.
So, to help small business owners trim the fat from their expenses and increase their revenue this year, here are a few tips.
How to Increase Profitability
Choose Quality over Quantity
This point pertains particularly to businesses offering services. Small businesses often like bulk deals because of the price they see at the bottom of the invoice. However, bulk orders for services usually result in customers expecting discounts and added extras, which results in businesses end up doing more work for less money.
This the opposite of what businesses should be aiming at. Instead of this situation, businesses should look at doing less work for more money. It is better to turn down the jobs that will require more outright labour in favour of fewer jobs that offer better revenue.
Choosing quality assignments and turning down the rest will provide more time to devote to finding even more quality assignments.
Focus on Income
When quoting prices, businesses should be mindful of quoting payment terms as well. This allows options when addressing clients who have not paid on time. It is also important to invoice soon after the completion of every job. This may seem obvious, but many business owners neglect to do this.
Keeping track of unpaid invoices is important to a business’s revenue stream, but it is also important to a business’s reputation. Clients who think businesses aren’t concerned with getting paid won’t concern themselves with timely payment.
Following the Federal Reserve’s review at the end of January, the interest rate has seen a significant hike. This makes it a good time for businesses to re-evaluate their capital with a view to decreasing the rates payable. Businesses whose loans are already at high rates, but have been making steady payments, may be able to shift to different products which offer lower rates.
If you are looking to trim the fat off your business this year, these three tips might help you towards that end. Remember, a profitable small business will find a way to decrease its costs while increasing its revenue.
Image credit: https://www.yahoo.com/food/trying-to-slim-down-7-things-to-avoid-at-all-175655764.html