The most important thing to remember is that profit is a result. It is a number that is the difference between income and costs. So to change the number that represents profit, you have to change income and/or costs.
There is a tendency to focus on reducing costs. It is a good idea to eliminate waste and make your expenditure as productive as possible. But there is a finite limit to how much this will increase profits. For example, if you reduce down to working on your own from home then there are no further savings to be made – and so no further potential to increase your profit.
On the other hand, if you focus on increasing income, there is no limit to amount by which profits can be increased.
There are many factors behind your sales or turnover figure. The number of customers, number of transactions per customer and the frequency of transactions all influence your turnover. However, you may have heard before that turnover is vanity – profit is sanity.
So you don't just need to increase the level of income. You need to ensure that, for every sale and every fee that you charge for your services, you are getting the best price you possibly can in order to maximise your profits.
If you want to learn more about pricing to maximise your profits, click here.
