profit first

How to Make Your Business More Profitable: 12 Proven Strategies

Learn how to increase business profitability with strategies that work. From pricing to cost control to efficiency, here's how to keep more of what you earn.

KW
Kevin Wilson
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Revenue is exciting. Profit is what matters.

I’ve seen businesses with $2 million in revenue barely surviving while others with $500,000 are thriving. The difference isn’t sales—it’s profitability.

Here are 12 strategies to make your business more profitable, starting today.

The Profitability Mindset Shift

Revenue vs. Profit

Most business owners obsess over revenue. “We did $1 million this year!” But if costs were $1.1 million, you’re losing money.

The real question: How much did you keep?

The Profit First Principle

Traditional thinking: Revenue - Expenses = Profit (whatever’s left)

Profit First thinking: Revenue - Profit = Expenses (pay yourself first)

When you take profit first, you’re forced to operate on what remains. This constraint drives profitability.

Strategy 1: Know Your Numbers

You Can’t Improve What You Don’t Measure

Before improving profitability, know your current state:

Key metrics:

Action steps:

  1. Calculate current profit margin
  2. Compare to industry benchmarks
  3. Identify your most and least profitable areas
  4. Set specific profit targets

Example Profit Analysis

Product/ServiceRevenueCostsGross ProfitMargin
Product A$200,000$80,000$120,00060%
Product B$150,000$105,000$45,00030%
Service C$100,000$30,000$70,00070%
Total$450,000$215,000$235,00052%

Product B is dragging down your overall margin. Service C is your profit engine.

Strategy 2: Raise Your Prices

The Fastest Path to Profit

A 10% price increase often flows directly to the bottom line.

The math:

After 10% price increase (assuming no volume change):

That’s a 50% increase in profit from a 10% price increase.

When to Raise Prices

Signs you’re underpriced:

How to Raise Prices

Strategies:

Strategy 3: Cut the Right Costs

Profitable Cost Cutting

Not all cost cutting is equal. Some cuts hurt; others help.

Good cuts (don’t affect revenue or quality):

Bad cuts (hurt the business):

The Cost Audit

Review every expense with these questions:

  1. Is this necessary for our operation?
  2. Does this contribute to revenue or quality?
  3. Could we get the same result for less?
  4. When did we last negotiate or shop this?

Quick Wins

Strategy 4: Improve Operational Efficiency

Time Is Money

Every inefficiency costs you:

Identify Bottlenecks

Common profit-killing inefficiencies:

Automation Opportunities

High-ROI automations:

An hour saved on repetitive tasks is an hour available for revenue-generating work.

Strategy 5: Fire Unprofitable Customers

The 80/20 Rule

Often, 20% of customers generate 80% of profit. And some customers are actually costing you money.

Unprofitable Customer Signs

What to Do

Options:

  1. Raise their prices to profitability
  2. Reduce service level to match what they pay
  3. Refer them to a competitor
  4. Let them go with notice

It feels counterintuitive, but freeing up resources from unprofitable customers lets you better serve profitable ones—and find more like them.

Strategy 6: Increase Customer Lifetime Value

Keep Customers Longer, Make More Per Customer

Acquiring new customers is expensive. Maximizing value from existing customers is profitable.

CLV strategies:

Retention Math

If average customer value is $5,000 and average customer stays 3 years:

If you increase retention to 4 years:

Strategy 7: Focus on High-Margin Products/Services

Double Down on What Works

Not all offerings are equally profitable. Focus resources on high-margin items.

Analysis approach:

  1. Calculate margin for each product/service
  2. Identify top 3-5 by profitability
  3. Allocate more marketing and sales resources there
  4. Consider sunsetting low-margin offerings

Example Shift

Before: Equal attention to all services

After: Focus on Service A

Same revenue, higher overall profit.

Strategy 8: Reduce Waste

The Hidden Profit Drain

Waste exists in every business. Finding and eliminating it improves profit without cutting necessary costs.

Types of waste:

Waste Reduction Steps

  1. Document your key processes
  2. Identify where delays, errors, or excess occur
  3. Measure the cost of each waste type
  4. Implement fixes for highest-cost items
  5. Monitor for improvement

Strategy 9: Improve Collections

Cash You’ve Already Earned

Slow collections hurt profitability:

Collection Improvements

Faster payment strategies:

A 30-day reduction in collection time on $100,000 monthly revenue is $100,000 more working capital.

Strategy 10: Negotiate Better Vendor Terms

The Other Side of Margin

Revenue minus costs equals profit. You can improve profit by reducing costs through better vendor agreements.

Negotiation opportunities:

Vendor Review Checklist

For each major vendor:

Strategy 11: Invest in Employee Productivity

Your Team Drives Profit

Productive employees generate more revenue per hour of labor cost.

Productivity investments:

The Productivity Math

If employee generates $80/hour in revenue and costs $30/hour:

If productivity improves 20%:

Strategy 12: Implement Profit First

Take Profit Before Spending

The Profit First method ensures profitability by design:

  1. Set target allocations: Profit 10-15%, Owner Pay 35-50%, Taxes 15%, Operating 30-40%
  2. Separate bank accounts: Keep profit separated from operating funds
  3. Transfer percentages on every deposit: Profit first, then expenses
  4. Operate on what remains: Constraint drives creativity and efficiency

Why It Works

When profit is what’s left over, there’s never enough left over.

When profit is taken first, you find ways to operate on less. Every spending decision gets more scrutiny. You say no more often. You become profitable by design, not by accident.

Creating Your Profitability Action Plan

This Week

  1. Calculate your current profit margin
  2. Identify your most and least profitable products/services
  3. Review expenses for obvious waste

This Month

  1. Choose 2-3 strategies from this list
  2. Set specific, measurable profit goals
  3. Implement first changes
  4. Set up tracking for results

This Quarter

  1. Review results of initial changes
  2. Add additional strategies
  3. Consider Profit First implementation
  4. Build profitability review into regular routine

Common Profitability Mistakes

Mistake 1: Cutting Marketing First

Marketing generates revenue. Cutting marketing to improve short-term profit often tanks long-term profit.

Mistake 2: Discounting to Grow Volume

Discounts attract price-sensitive customers who are often the most demanding and least loyal. Compete on value, not price.

Mistake 3: Ignoring Small Leaks

A $50/month subscription here, a 2% overcharge there. Small leaks add up to significant profit loss.

Mistake 4: Not Tracking by Product/Customer

Overall profit can mask that certain products or customers are unprofitable. You can’t fix what you don’t see.

Mistake 5: Assuming Revenue Growth Solves Everything

Growing revenue with low margins just means more work for similar profit. Fix margins first, then grow.

The Bottom Line

Profitability isn’t about working harder or selling more. It’s about keeping more of what you earn through:

Pick 2-3 strategies. Implement them well. Track results. Then add more.

Small improvements compound. A 5% better margin becomes transformative over time.

Ready to make your business more profitable? At Profit Path Books, we implement the Profit First system and help businesses understand their numbers. Book a consultation to discuss your profitability goals.

KW

Kevin Wilson

Profit First Professional and QuickBooks ProAdvisor helping small business owners in Utah and beyond achieve financial clarity and consistent profitability.

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