Every business thinks about increasing their profitability at an early stage. For some businesses, profitability could be a single step away while for others it could mean implementing more than one strategy and gradually getting there. Profit is essential to sustainability of business and must be at least one marker of business success.

Once you get into the research, you would easily be lost in vast pools of information available on business strategies, including profitability. However, here are the top 3 required and must-know areas in order to drive more profits into the firm.

1. Reducing Costs – Cutting costs is essential to not waste spending where it’s not required. It’s crucial to identify where to cut costs but not at the stake of reducing quality of products or services. Every dollar you save by eliminating the cost of things that don’t add value to your company or to your customer drops directly to your bottom line. Your key cost areas that need to be considered are:

– Suppliers

– Finance

– Premises

– Production

– Using activity-based costing is an effective way to find the real cost of specific business activities. Activity-based costing shows you how much it costs you to carry out a specific business function by attributing proportions of all your costs – such as salaries or raw materials. The initial analysis may take time but using activity-based costing often shows up costs that would not normally uncover using more traditional costing methods.

• 2. Give Your Customers What They Want – When you give your customers exactly what they want, pricing is not an issue for them. When the value is being delivered, that outweighs price, because the value is helping them produce better results than they were previously experiencing. Also, when you give customers exactly what they want, they become your biggest business advocates.

3. Know Your Break-Even Point – This is the number of items that you must sell each month to break-even or start making a profit. You use this break-even point to evaluate the potential effectiveness of any advertising or any other expense that you incur to increase sales. Every expense to increase profits must be seen as an investment with an expected rate of return that is greater than the cost.