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  • Aug

    How You Can Increase Your Business’s Profitability

    Filed under: Business Services;

    Increasing your business’s profitability may become quite the task after some time. Your business may be on the cash cow stage of the Product Life Cycle (PLC), but it may not be generating as much profits as before. That may be because either a fixed cost increased or the product price reduced while the costs per product either increased or stayed the same. Whatever the case, increase your profitability is very vital to a business with shareholders as they expect profit returns at the end. If not, shareholders will start selling the share making the share value to drop.

    So let’s see some tips on how to increase profits!

    Fixed costs and direct costs

    There is a very important relationship between fixed and direct costs and profit. Unless you understand its relationship you will be unable to achieve higher profits. Fixed costs are the costs that will not change up to a certain limit regardless of how much ever produced or bought. For instance rent of premises. These costs remain the same. So you need to look for ways to reduce your fixed costs. The direct costs are the costs of the either producing the product or buying it. For instance, cost of raw material. This cost will vary with the number of products. So you should only reduce the prices if the fixed cost per product reduces and you can pass it on to the consumer. And if the fixed costs does reduce per product and you leave the price as it is you will be able to enjoy higher profits!


    Diversification is great option for businesses that have the ability to manage another product. It may be a similar product or a completely different one. Whatever the case a business should only exploit other business opportunities if it is a sure shot and you can earn some profits through it. Make sure to diversify to products that have a good reputation in the market. You may however need to meet a company formation agent to get the necessary documents and legalities in check!

    New market penetration

    Penetrating in to a new market with a new product you be will required to get yourself registered which will incur company formation services HK. When penetrating into new markets with a new product or if you decide to penetrate a new market with your existing product you may be able to find potential leads you never thought possible. These leads should then be converted into sales. Penetrating new market should always be undertaken after careful market research.

    Renewal of product

    You may want to try making changes to your existing product, to increase the profitability. For instance, if you are a biscuit manufacturer you can come up with a new flavour. The new flavour may become the hit of the town. Sometime the same product in a different packaging has done well and brought in greater profits. You may want to try making a few changes to your product when you start feeling the decline in sales.

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