Six tips to raise SME profitabilityPublished on 23rd May 2017 2017-05-23T20:55:04+00:00 - Last update on 15th November 2019 2019-11-15T00:32:28+00:00
During the early stages of development, it can be hard to turn your business into a profit generator. But when your business does eventually turn a profit you’ll want to guard and seize it tightly with both hands, never letting it slip away. From here on your attention needs to be set firmly on figuring out more and more ways to strengthen profitability. It can a tricky task to achieve, wrought with the need for trial and error, but if you’re successful the rewards can be plentiful. So to help, Rangewell are offering you 6 tips for raising profitability in your SME business.
1. Performance indicators
Tracking the success of your business’ day-to-day operations can be tricky and complex. That’s precisely why you need to establish performance indicators for each member of staff, day-to-day operations and your business’ finances. Your ultimate goal should be to ensure and continually grow profits and revenue streams. As such, you need to give everyone performance goals or allow them to create their own, encouraging a rise in standards. To keep track, try utilising morning meetings and end of the day work log sheets.
2. Keep focused and assign goals
Creating a common goal amongst your staff is an excellent way to boost productivity which, in turn, benefits your business’ profitability. Of course, the goal is to always increase profits but what you and your staff want to know is ‘how’. You need to set targets showing that, by a certain date, the business needs to be at a certain stage in its development. It’s generally best to tackle growth in stages and form a strong strategy. Give everyone realistic and achievable targets that benefit both employees and the business as a whole. Doing so is guaranteed to raise morale and productivity significantly, offering everyone the tools necessary to better serve your customers in their assigned role.
3. Remuneration and incentives
Setting remuneration and incentive schemes can help ensure that everyone is heading in the right direction, driving your business onwards towards your goals. A bonus scheme can be useful, just be certain that at least 80% of the work put in involves boosting your business’ performances. What you really want is an atmosphere of co-operation rather than having everyone compete. The reason being that it will help to keep everyone’s efforts co-ordinated and reduces wasted time.
4. Check whether you need more staff
As your business grows, so too does the workload. Sometimes, are you feeling that you need to introduce new skills in order to keep your business progressing? Or, there simply isn’t enough time for your existing team to get everything done? If the answer is yes, you may have no other choice but to hire more staff.
Of course, it’s good to be able to get things done as economically as possible. However, if things aren’t getting done then your current production rate isn’t good enough. Weigh up the cost of wages against the value and potential benefits of the current project. If you’re missing deadlines, or the quality of the work is declining, then you’ll undoubtedly need to hire additional staff. Time is a precious commodity in business, if adding someone else can make your operation much more effective then it’s generally worth the extra expense.
5. Remember your customers
Factoring the potential impacts of change amongst your customers is important. Trying to a get a better sense of the bigger picture is one thing but you all need to pay attention to the smaller details too. Everything you do to your business’ structure and strategy should be about adding extra convenience for you customers. Your operations should be effective and the goods and services you deliver should be second-to-none. Customers are impatient and can be damning in their verdicts. If your business fails to deliver on its promises they’ll take their business elsewhere – reducing your profitability.
6. Be nice and have fun
It can very difficult to grow your business, let alone stimulate profitability if your business constantly losing staff. As such it is vital that you make your place of business as fun and engaging as possible. Generating a positive vibe help to boost productivity and empower your staff to achieve more. It’ll also help by encouraging better communication amongst your staff, allowing them to discuss and implement new ideas. If a new technique is discovered that’ll make your current operations more efficient, profitability will increase as a result.
Apply for Business Finance
Business finance is essential for every business, regardless of your sector or size. But for SME businesses especially, access to this precious commodity can be what makes or breaks your business. Finance can be applied for a wide range of reasons including hiring new staff, adding increasingly specialised and cost-efficient equipment, and expanding your operations into new areas. By spending today you can generate and raise your profits tomorrow, to the benefit of your whole business.
However, with major high street banks turning away from SMEs in favour of big business, acquiring the funds you need can be frustrating and time-consuming. That is why more and more business owners are turning to Access To Business Finance providers, such as Rangewell. With our services and expertise, you can source the most suitable and affordable finance package to suit your business’ needs including:
Typically Secured or Unsecured, business loans are excellent for raising capital for a wide array of purposes, including acquiring new equipment and expanding operations. Applying for an Unsecured loan let you can borrow anything from £5,000 to £250,000 without the need to set aside assets. Meanwhile, Secured loans help you acquire larger sums ranging from £5,000 to as much as £1,000,000. In exchange, the lender will require you to set down assets as security. With both options, you will be required to comply with a fixed monthly repayment scheme, plus interest.
Merchant Cash Advance
In order to qualify for this means of finance, your business must be able to support credit and debit card payments using devices such as Chip & Pin. This is because the product relies on your monthly receivables or revenue. After reviewing 3 or more of your business’ consecutive monthly sales reports a potential finance lender may offer to purchase your potential earnings for one particular month, at a discount.
However, what makes this product stand apart from a business loan is how repayments are structured. If a lender were to offer you a rate of 18%, this means that they recover 18p for every £1 your card customers spend, until the product has been fully repaid. Consequently, if you make fewer sales on a particular month you pay less. But should you experience more then you’ll pay more.
Invoice Finance is a popular means of unlocking the money contained within any unpaid invoices in order to support your business. When considering this method finance for your business, it is essential for you to understand the two types you can apply for and how they work:
- Factoring lets you borrow a lump sum equivalent to around 90% of an outstanding invoice’s overall value. With this option you are the credit controller, ensuring that payment owed by the customer in question is forthcoming. Until you’ve received full payment, or begin taking regular instalments, you won’t be required to begin the fixed monthly repayment process, plus interest. That said, however, lenders may choose to specify a period laying out exactly how long they’re prepared to wait. Should this period expire, the lender will begin the repayment process regardless of whether or not you’ve been paid.
- Discounting allows you to borrow up to 80% of an outstanding invoice’s total worth. With this option, however, the customer responsible for the invoice will, instead, pay the sum owed directly to your lender. You also have the option of making yourself the credit controller or making use of the lender’s ledger service, if available. Once the lender has received full payment from your customer, you will be required to transfer the remaining 20% into a facility run by the lender. After the deduction of any fees and service costs the remaining sum, or balance, is returned to your account.
Our values are simple – We’re on your side. Our services are clear and transparent. We support a wide range of SME businesses of every shape and size, for finding every type of finance. Follow us on Twitter and LinkedIn for business tips and tricks, and feel free to call us on 0203 637 2340 if you’d like to chat about what we can do for you.
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