Discover the keys to obtain more profits, improve performance and achieve your business goals.
Increasing business profitability is one of the main objectives of any business. For this, it is necessary to adapt to constant changes and find a way to obtain benefits not only economically, but also socially.
For example, a company committed to the well-being of its employees and the environment will have a notable advantage over its competition and its path to success will become much easier local business and technology transfe.
But, to get to that point and achieve controlled growth, it is first necessary to understand a series of concepts and definitions that will make its development much easier.
If you have ever wondered how to improve your business profitability , you have come to the right place. Keep reading and discover the keys to achieve it!
What is business profitability?
The profitability of a company is a very important financial indicator because it allows us to know the profit and benefits obtained from an investment made.
We can say that an organization is considered profitable when its income is higher than its expenses and when there is a considerable difference between the two; That is, the higher this disparity, the more profitable the company will be.
So, for a company to be on the right path and its profitability to be much higher, it is necessary to always maintain a series of good practices and carry out both internal and external analyses.
This will be essential when comparing yourself with other organizations because it helps detect possible problems and based on that, strategic decisions can be made for the businesses of the future.
A company is considered profitable when:
Allows its owners to be rewarded through a greater return on investment
Meet your responsibilities in the short term
Has the ability to operate efficiently
May indicate level of public acceptance and ability to compete
How is the profitability of a company measured?
To make a good calculation of the profitability of a company, it is necessary to carry out an analysis or study that allows obtaining precise results.
Through a report, different indicators or ratios can be analyzed to know the level of profitability. These are:
ROA : It refers to the economic profitability obtained from an organization’s assets and provides a vision of efficiency. For a company to be profitable, this indicator must be greater than 5%.
ROE : It is a very important indicator in any investment and measures the profitability with respect to the equity that the company has. Its result must be higher than the minimum profitability required of the shareholder to be considered profitable.
In addition to being a general calculation, profitability can also be used by different sectors or areas within a company to calculate something specific, such as the relationship between profit and assets, profit and sales, etc.
How to increase the profitability of your company?
Among the basic recommendations to increase the profitability of a company and achieve success, the following five stand out:
Identify profitability
As a first measure, each of the most profitable sources of the business must be identified, as well as those that generate losses. This is a great help to put together an action plan that allows you to maintain those that provide the greatest benefits and act on those that do not.
Improve logistics and service
Optimizing the logistics of an organization is very useful to achieve better results. It is essential to have good customer and user service, and provide an excellent experience related to the product or service requested. This will improve the reputation of the company and will undoubtedly be reflected in the revenue.
Update the company
For optimal business growth, it is necessary to adapt to digital transformation and propose innovative changes in methodologies. Modernizing the company is very useful to streamline processes, improve relationships with people , save costs and much more.
Prioritize sustainability
The social and environmental commitment of companies is very important in these times and is an excellent way to retain staff and build customer loyalty, since the values and commitment of each organization must always be highlighted. Sustainable management makes a difference and helps maintain productive growth.
Reduce unnecessary costs
To improve the profitability of a company, you need to know how to perfectly manage the resources it has and you must be able to place profits above expenses. The first step to achieve this is to reduce costs and identify the main sources of expenses and income.
Now that you know the keys to increasing the profitability of your company, encourage yourself to apply them in your business and you will notice how the path to success will become much easier.