The best way for an SME to maximise its profits is to look at the two main levers that it can pull, being either an increase in sales volume, or an increase in margin profitability, which generally means either an increased sales price or a reduced cost space.
Looking, for example, at increasing sales volume, really we need to be looking at the product itself to make sure there’s no risk of obsolescence and make sure it’s still relevant to both the marketplace and the client demand, but also to look at what the customer actually wants. A successful business would look at the characteristics of their ideal customer to make sure that firstly they are supplying what that customer needs, really to see also if there’s any ancillary products it can look to sell to that client, but also to help form its marketing strategy going forward.
If we’re starting to look at margin, it sounds again simple to increase the sales price, but it does come with its own risk. Some industries and sectors are very price sensitive, but that doesn’t mean you shouldn’t look at price increases, but to do so, you will need to look at what really differentiates your product or service, and what is the USP of your customer base and your service line, to really justify that increase in sales price. Now, cost, most people think about cost and just reducing cost, which isn’t necessarily the right way to go to get cost efficiencies.
For an SME to be successful in the longer term, we are looking at sustainable longer term business profitability, which ironically could mean looking at investing more in the shorter term, whether that be on getting a better supplier, investing in better people, looking at training, or even longer term marketing. So, all we’re looking at is really looking at that sustainability, to make sure we have the right balance, between quality and cost.