How to Maximize Your Profits

Business owners want their bottom line to be as profitable as possible. To maximize profits, the owner must be diligent in cutting frivolous costs and boost productivity among employees. This is an ongoing process that often faces many challenges. The key to success is to always remember that at the end of the day, the business's profits will serve two purposes. The profits will be reinvested in the business to allow the business to grow. The profits will also be distributed to the business owner. Step1 Analyze where money is being spent. Overhead is one of the biggest categories of expenses that business owners face. A long-term lease is often an effective way to ensure you are aware of increases in your rent expense. Review the other categories ofexpenses. If there is a large increase in a specific category, look into the details of that category. Perhaps you had an increase in advertising or insurance costs. If the advertising campaign is paying off in increased sales, then the higher expense may be worth it. Insurance costs are always on the rise. Avoid changing insurance providers on a regular basis unless rates skyrocket. Your insurance broker knows your business and should be offering the best rate possible to keep your business. Step2 Review your cost structure. Make sure you have a sufficient markup on your goods. When the cost of raw materials and related costs increase, the additional costs need to be included in the selling price. Reviewing your cost structure on a regular basis will help you keep track of costs that are on the rise before the cost is too great to completely include in your selling price. For example, if the cost of a widget was$10 but now is $12, you can pass along aportion of the incremental cost to customers without affecting your profit.However, if you don't increase the price to the consumer until the widget cost increases to $50, you are bound to lose customers due to your skyrocketing prices. Step3 Motivate your employees. When your employees are happy, more quality work gets accomplished in a shorter amount of time. If employee motivation is really holding your company back, consider using simple motivation techniques. For example, the Employee of the Month may receivea $50 gift card for a local merchant. Theemployee who increases his output may receive a lunch bought by the company. Having a company picnic where employees bring their families for an afternoon of games and food is another suggestion. If you use a systemthat requires a tangible amount of product from employees, do not set goals too high. This will only decrease employee morale and negatively impact your profitability.