Economic forecasts suggest the economy will slow during the 2023-24 financial year, which means it’s vital you look for ways to make your business more profitable. The Reserve Bank has forecast that economic growth will slow to 1.5% in FY24, compared to the current rate of 2.3%. Meanwhile, unemployment is forecast to rise to 4.25% by the end of June 2024, from its current level of 3.6%. If those forecasts hold true, trading conditions will become tougher over the next 12 months. With that in mind, here are seven things you can do to make your business more profitable.
1. Speak to your accountant
By drawing on their experience and consulting industry benchmarks, your accountant will be able to provide you with valuable insights into your business, such as:
- Whether your pricing is too low
- Whether your costs are too high
- Which customers are profitable and which aren’t
- Which products/services are profitable and which aren’t
Potentially, you could use that information to adjust your pricing, purchasing and strategy, and improve your bottom line as a result.
2. Improve your debt collection
Again, with the help of your accountant, and potentially the Payment Times Reporting Scheme as well, you could significantly improve your invoicing and debt collection. Your accountant has seen it all, so they’ll be able to advise you on how to create an efficient system that maximises payments and minimises bad debts. As part of the process, you might need to fire some customers who are ultimately unprofitable because you have to waste so much time chasing them for payment.
3. Do more marketing
As a general rule, the more marketing a company does, the more sales it makes. So look for ways to do more marketing this financial year. That might involve:
- Publishing regular social media content
- Sending monthly email newsletters to your database
- Joining a networking group (such as BNI)
- Giving speeches at industry events
- Chasing media coverage
4. Ask for referrals
Make a list of your happiest customers and ask them to refer you to your ideal customer. There are two reasons why this can be such a successful tactic:
- · Your happiest customers are likely to match your ideal customer type – as the people we’re best at serving tend to be the ones we most enjoy serving
- · These happy / ideal customers are likely to know other ideal customers – as like attracts like
5. Reduce unnecessary expenses
It’s not spending that’s the enemy, but wasteful spending.
Every cent your business spends should improve your bottom line in some way. The return doesn’t have to be immediate – the machinery you buy today might only pay off in five years. Nor does it have to be tangible – the snacks you buy for your employees might increase staff loyalty, even if you can’t quantify it. But there does have to be some sort of connection between spending and profitability.
With that in mind, do a line-by-line review of all your outgoings. Look to retain expenses (even large ones) that are likely to deliver profits and eliminate expenses (even small ones) that aren’t.
6. Review your staff processes
Many businesses could significantly improve their profitability by changing the way they hire and manage staff.
If you lose an employee this financial year, don’t automatically look for a like-for-like replacement. Instead, make a list of all their responsibilities, and see if some can be eliminated (if they’re low-value), outsourced (to a lower-cost specialist) or automated (via software).
Also, don’t let your staff coast; instead, set them SMART goals. Chances are, they’ll not only become more productive, they’ll also enjoy their job more, as most people enjoy the feeling of making progress towards a distant goal.
7. Consider refinancing
Australia’s business finance market is very competitive. So if you have a business loan or line of credit, there’s a good chance you could switch to a comparable product that charges lower interest rates and/or fees.
But don’t try to do it yourself – get help from a commercial finance broker.
Thanks,
Brad and the team