Strategies to Increase Profitability: CEO Secrets and Tips

Whatever you can do, honestly, to increase revenue and decrease expenses, will affect your strategies to increase profitability in your company.

Does it seem easy, then, to model processes to achieve higher profitability?

Not really.

The problem is that, in most cases, efforts to raise revenue always have a cost, which must be taken into account.

And, likewise, whenever expenses or costs decrease, this tends to affect revenues negatively (trend, not law!).

Let’s understand this better by listening to 2 entrepreneurs who know a lot about this subject.

See also: 5 awesome ideas for business process simplification

How to implement strategies to increase profitability

See what Marcus Ribeiro has to say about it, CEO of Pluga, a Brazilian startup that provides ready-made integrations for cloud-based apps:

Marcus RibeiroProductivity is the relationship between production and the factors of production used, while profitability is the return on investment over a long-term horizon. Productivity and profitability are, therefore, directly proportional quantities (the more productive I am, using fewer resources, the more profitable my business will be). Look at the administrative area of a company. One of its functions is to organize accounts payable, accounts receivable, pay rates and taxes, salaries and issue invoices.

Automating financial processes, using solutions such as Pluga, (an integrated financial manager with means of payment, like an integrated payment provider with an invoice issuer) can make a department more productive, incorporating perhaps another more strategic job for that administration/finance employee, which can increase the profitability of a company as a whole (Example: They could look at other suppliers for purchasing office supplies).”

Note that Marcus points out a strategy to increase the profitability of a company by reducing costs (automating repetitive processes and reducing work hours), without affecting revenue, and actually: making the department even more productive.

Pedro Renan, CMO of We Do Logos, the largest collaborative creation platform in South America, gives warnings for those who want to implement strategies to increase profitability in their companies:

Pedro Renan“Increasing profitability is always a goal for every business. After all, who doesn’t want to earn more and spend less? Unfortunately it is more complex than it seems.

Here at We Do Logos, we designed some strategies and after a few years (yes … it’s not overnight) we managed to increase profitability from 25% per sale to almost 40%.

These are actions ranging from price increases, team management, acquisition channels, etc.”

Learn More: Use the Ansoff Matrix and Determine Business Growth Strategies

Check out some practical tips from these successful entrepreneurs:

Marcus Ribeiro points out two main strategies to increase profitability in companies:

“First, focus on the customer. It’s very common for the client himself to contact the company signaling his ‘pain’, which is usually a super ‘opportunity in disguise‘.

However, it is also very common for companies to perceive service (and service time) as a cost, employing people that are unprepared to serve or (genuinely) uninterested in analyzing a client’s problem.”

He makes an important point:

Greater opportunities for increased profitability (product improvement, new features, system bugs) can be found by talking to the customer.”

This comment is very reminiscent of Bill Gates’ famous phrase:

“Your most unhappy customers are your best source of learning.”

Let’s look at the second of Marcus’ strategies to increase profitability:

“Second, automate all possible operational work. You know that copy and paste work; such as manually issuing invoices, changing lead status’ in email trigger tools, or sending out pending payment text messages.

These are all examples of jobs that take up considerable time from the day to day and do not add value to your company. These jobs are not investments, they’re costs!

‘Oh, but I don’t hire anyone, I do it all myself.’

It is still a cost. After all, how much does your time cost?

Pedro Renan employs 3 different strategies to increase profitability in his company:

Price Rising: Many people fall into the trap of the famous ‘debtor account’. That raising prices will lead to you increasing revenue and profitability.

Of course the opposite is true. You will lose sales and your revenue may not increase.

So, when thinking about leveraging your prices, think carefully about what the result might be. If you have fewer customers, you’ll have less repurchases and fewer leads.

Does the extra percentage of profit per transaction pay off and result in an account being acquired?
An interesting tip is always this, if you really do decide to raise the price, make a campaign for your current customers and another for those who are not yet your customers.

For those who have not yet made purchases, you can give one last chance to them saying that the price will increase on date X and that they can still buy at the old price until that date.

For the old customers, you can use the increase to keep them loyal, saying they did not pay anything more because they were already customers, otherwise you would have given the increase to them as well.

In this case the communication has to be very precise and perfect, and that generates a great benefit. If you don’t, you run the risk of people leaving your company.”

Regarding team management, Peter uses the teachings of Jack Welch, see:

Team Management: A good way to make your company more profitable is by increasing your team.

A methodology I like a lot is Jack Welch’s, a former president of G.E. There he used the 20/70/10 method, which is; 20% of the people in your company are stars and play a spectacular role, 70% of people do only enough to get by, but they are not brilliant, and 10% of people have to leave the company every year because they are outside of the desired team values or expected results.

This generates a very great sense of productivity, since each year you are increasingly keeping only the best workers. By doing that you produce more and spend less!

To conclude, Pedro gives a warning about fads in management:

Channels of Acquisition: Unfortunately, we often live based on trends. Currently everyone talks about Inbound Marketing and that this is the best way to do marketing and that it works for everyone and that you will get amazing results. Here at We Do Logos we have used Inbound and we had great results, but the problem was that we limited ourselves to Inbound. Before you settle on a single way of doing marketing, you need to do tests.

For you it might be that Inbound doesn’t work, it might be expensive and new accounts aren’t being acquired. So always look for dozens of alternatives and test them. Never believe that a methodology is bad unless you have tested it. We currently use inbound, outbound, paid media, affiliates, etc. All together and with this we have much better cost per acquisition results.”

Check also: What are the challenges of entrepreneurs?

What processes do you need to remodel in your company to increase profitability?

Get inspired by the opinions of these entrepreneurs and start studying strategies to improve profitability in your business right now.

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