How to increase bottom line
In this series of 19 short articles, StratPad’s founder discusses the fundamentals of starting and running a small business.
Today he tells us how to increase bottom line profit:
Q: Can I improve my profit margins without sacrificing quality for my customers?
A: There are some obvious ways for a small business to increase its profit. One of them is just simply to raise prices and another one is to simply lower costs. Those are obvious things and you should spend some time looking at them. I think that you can be more successful if you look beyond just that line. For example, if you are able to increase your customer’s willingness to pay, it then becomes easier for you to raise your price. You can do this through creative marketing or to bundle some stuff up. There’s a whole variety of ways you can do it. You can often do that in conjunction with a discussion with your particular customer.
Similarly with reducing costs. You can take the hard edge route and just simply try to push your costs down but sometimes having a discussion with a supplier to try to help your supplier reduce their costs works. It’s good for them and then in the cost savings that they have, you can then negotiate a reduction in your costs to them.
Another way to increase your bottom line is finding different customers that are willing to purchase your product or packaging your product in a slightly different way to appeal to the same customer or to build a broader range of customers. Apple is very successful at doing this; by releasing the iPad, iPad 2, iPad 3 and iPad Mini, they’ve re-packaged their product at varying price points in order to maximize bottom line profit.