A small business cannot play around with huge volumes for making big profits. As an entrepreneur, you should always look for improving efficiency in your business to make more profits with smaller volumes. Often businesses resort to cutting down costs to increase profitability but that might not be the best work around and increasing sales may not be possible every time. Below are three suggestions to optimize your small business to make more profit.
1. Eliminate activities and services that your customers do not value
It is said that almost 90% of the activities conducted to deliver a product or service, in a normal business, are non-value adding for customers. Find out all those activities that would have a become a regular part of your business over a period of time. An easy tool to find out all those non-value adding activities in your work is process maps. Create an end-to-end process map of all your business activities and qualify each step as a value adding or non-value adding activity. Once you have identified the non-value adding activities in the system, try eliminating them. Since all non-value adding activities add to the cost of final product or service, you will be able to realize more profits by eliminating them.
2. Align your process with that of your customers
You should know what is the problem that your customer faces and how your product or service fits in for resolving the problem. Work with your customers to understand their processes, requirements and problem areas to improve your offering. By aligning your process with your customer’s, you will be able to offer a product or service that your customers will value and will be ready to pay more for the same.
3. Don’t Offer Value Adding Services For Free
While serving customers, businesses offer various types of allied services without any charges. Repeat the activity of identifying value and non value adding activities in your process and focus on value adding activities this time round. If you come up with activities which are valuable to your customers but you are not charging for them, it means you are losing on both additional revenue as well as associated profit. Start charging for all those activities and your customers will be happy to pay for them if they find them valuable.
Before jumping on to eliminating activities or start charging your customers, you should understand that the above suggested activities cannot be carried out in isolation and requires working with your customers constantly.
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