Learn what it takes to maximize profits without compromising your brand’s value or market standing.
Profitability is an essential measure of your business's earning capacity. It also shows how efficient the business is while justifying the time, resources, and energy you’ve poured into the enterprise. Profit is closely meshed with every company's fiscal framework and is a key factor for financial strength and overall business success.
Generally, making more profits is always a good thing, as long as it’s not at the expense of the company’s ethics or mission. In some cases, more pressing matters such as clearing debts and seizing new business opportunities can motivate entrepreneurs and CFOs to strategize on increasing their company’s net earnings.
However, improving profitability is often easier said than done. For one, profit is the end product of several interlinked business processes, including product/service production, sales and marketing, internal operations, and leadership. Second, there's quite a lot to consider (depending on the organization) when making business changes to increase profits.
Enhancing profitability can seem daunting, considering that you’d still want to keep your customers happy and preserve the quality of your products and services. But with the right strategies, you can definitely earn more without compromising your company’s business posture. Here are six such strategies for CFOs:
It’s the CFO’s job to offer financial leadership and guidance. This leadership mainly involves blending valuable financial insights into business management strategies that help steer the cash flow and maximize profits. A CFO's leadership value cannot be overstated when it comes to streamlining financial management.
As a financial leader, you should be able to interpret the company’s fiscal records and trends in order to make informed and impactful finance-related decisions. This starts with understanding the company's current financial standing and growth objectives. From there, it’s just a matter of drafting a success-focused financial roadmap. Doing so should tell you what it’ll take (financially speaking) to achieve said objectives. Insightful financial analysis will reveal how much the company needs to earn in order to meet its goals and what can be done to realize those earnings.
Pricing is directly tied to profits. It's also linked to many other critical business factors such as customer satisfaction, the perceived product/service value, cost of goods (COG), and competitiveness. While repricing might seem like a quick fix to boost profit margins, it can be a risky move, though it’s sometimes the only way to make more money.
Simon-Kucher’s 2021 Global Pricing Study shows that overall pricing pressure has consistently dropped over the last few years. Still, 57% of businesses reported increased pricing pressure in 2021. And while only 27% of the respondents regarded pricing as the biggest driver for future growth, two-thirds of the surveyed business leaders said they were planning to increase their prices. The report points out that most companies are forced to raise their prices in response to the prevailing inflation.
A price adjustment can be a feasible means of maintaining healthy profit margins in these situations:
Increasing sales will lead to more profits. To do that, you must optimize your marketing strategy to drive volumes. The steps or measures you can take here will depend on the nature of your business, the already existing marketing framework, and your target audience. For instance, increasing sales could mean branching to new markets, adopting digital marketing techniques, revising the value proposition, personalizing marketing, or hunting for new leads.
All in all, customer retention is one critical aspect you shouldn't miss in your sales and marketing campaigns. This is because it’s more expensive to acquire a new customer than to retain an existing one. Second, the probability of selling to an existing customer is 60-70% compared to only 5-20% for new prospects. And lastly, increasing your customer retention by just 5% could increase your profits by between 25% and 95%.
Productivity is commonly regarded as a business's throughput, but it’s best defined as the relationship between business inputs and outputs. In other words, productivity is an efficiency metric. Profitability is heavily dependent on productivity because the bottom line is partly dictated by business efficiency.
Increasing productivity generally means making the most of your business resources — workforce, time, tools, equipment, facilities, etc. For the most part, it comes down to shifting to more efficient tech-based business processes and encouraging employees to do more. Below are some of the common ways you can boost profitability by increasing productivity:
Profit is the difference between a sale's total earnings and the cost incurred in producing that sale. By spending less on production, you'll have more cash left over as profit.
However, cutting production costs is not always so straightforward. For instance, you must consider a myriad of factors, chief among which is how to preserve the quality and standard of the final product/service at a lower cost of production. Additionally, the cost of goods is often deeply embedded in the business's structure, model, and culture. So, you might have to rethink your entire business plan when optimizing the supply chain for cost efficiency.
Here are some quick tips for improving the bottom line by trimming the operational budget:
There’s often a bit of a debate over which approach is better at achieving maximum profits: increasing sales volume or cutting costs. The thing is, cutting costs increases your profit margins — so you earn more without necessarily selling more. On the other hand, improving sales is more of a brute-force solution that increases profits through sheer volumes. The right choice should be the more practical or promising approach, depending on the business. Plus, you can always do both if the business allows it.
Expanding your market scope, ideally by offering new products or services, is another excellent way of increasing your overall revenue and profits. Adding new business offerings to your portfolio also diversifies your income streams and lowers your revenue risks.
As a B2B business, a lending service is one of the most profitable offerings you can add to your portfolio. If market analyses are any indication, the B2B financing sector is teeming with lucrative opportunities. The embedded lending industry is currently valued at just over $52 billion and is expected to hit about $200 billion by 2029.
Embedded financing or lending occurs when a non-financial company offers funding solutions to its customers or a financial company adds a new funding service to its offering. This type of lending forms a big part of alternative financing, an increasingly popular source of easy, quick, and low-cost funding for SMBs. Clearly, the embedded lending market is ripe for the picking.
The good news is that growing your revenue and profits by adding a B2B lending is incredibly easy with Loanspark as your co-branded partner.
Loanspark is a co-branded partner enabling B2B companies, accounting firms, financial brokers, marketing visionaries, and banks to offer new business funding products or expand their financial offering. We work hand in hand with business owners and CFOs to design suitable lending solutions for their customers that also serve as crucial sources of extra business revenue and strong drivers for customer retention.
With our two decades' worth of financial expertise, assortment of robust fintech tools, and collaborative BLaaS process, we can augment your B2B business with a profitable lending service in a matter of days.
Call us at 877-817-7275 to learn more about adding a new business lending service to your offerings and how doing so could enhance your company's bottom line.