When starting your own business from the scratch, the hardest part is not only to get it started, but to keep it going over time. In fact, it is estimated that approximately 70% of businesses fail in the course of their first year, and this figure increases as time goes by… But do you know the difference between a successful business and one that has gone bankrupt? The answer is its profitability. If a business is not able to maintain itself, then it will go to the wall. So, this time we will show you some tips on how to make your business more profitable.
These are the 5 tips to make your business more profitable:
- Identifying profitability and controlling expenses
First of all, you must be clear about the most profitable sources of your company. You should ask yourself: ¿what generates more profits for you? The idea is to establish priorities according to the products and/or services you are offering. It is also important to recognize those products and / or services that are not generating profits, and analyze what to do to improve this situation. Thus, improve your profits.
Once you have identified your main sources of income and expenses, you need to have a good control of expenses. Keep in mind that it is not worth it to invest in something that simply is not paying off. In this sense, the best choice is to give priority to what generates the most income.
Customer Service
Remember that there is no better advertising than the comments and recommendations of a happy customer; that is why the idea is to carry out a good customer service, which can be shown as short waiting time and fast and friendly attention. These are some examples that you can implement to improve the user experience because a good product or service is not enough.
A satisfied customer will not only recommend your business but will not hesitate to invest in it again. Thus, by providing good customer service you will be increasing your profits.
- Updating the company to new technologies
Technological advances facilitate the man’s work and streamline processes, so if your company keeps up to date in this area, in theory, it will be more efficient. This will represent higher productivity and as a consequence higher profits.
Imagine people still depending solely on paper notes to keep an inventory of products or look up prices. This is something that worked this way for many years, but nowadays with the use of the computer this type of work can be performed digitally, in a faster, more accurate and efficient way, as well as environmentally friendly.
Continuing with the example, imagine that this document can simply be shared through a simple link. This would further facilitate communication between your employees and, therefore, improve the productivity of your company.
- Train employees
Keep in mind that it is useless to be aware of new technologies if you do not train your employees in the specific areas. The key to success for any entrepreneur is to know how to delegate functions. For this reason, it is necessary to train your employees so that they can improve their work pace when using technological tools.
- Sustainability
It is no secret that after decades of pollution, the planet has already begun to take its toll. As a consequence of such environment impact, more and more companies are deciding to assume this environmental commitment by taking sustainability into account.
Society is aware that it is necessary for companies to take into account this type of strategies; therefore, there is a greater preference for those companies that decide to make sustainable improvements.
In addition, a sustainable commitment is something that can strengthen the bond between customer and company. This will allow a greater likelihood of customer loyalty.
How to calculate the profitability of a company?
We have already told you some basic tips to make your company more profitable. But…how can you calculate the profitability of a company? To get this information, you must carry out an analysis that allows you to obtain a report that will have the different indicators or ratio, among which results will be reflected such as the ratio of sales obtained.
In this aspect, it is very important that you have clear that the main indexes to measure and allow you to know the levels of profitability are ROA and ROE.
The ROA measures the economic profitability obtained by the company’s assets, providing an efficient vision in the use of the assets in order to generate profits.
The ROE is the financial profitability in charge of analyzing expected or known results after interest in order to measure the profitability with respect to the company’s equity.
Nowadays, to measure these financial ratios, digital tools such as professional software are used to calculate the profitability of a company in order to implement those actions that will increase the profitability of a company.
