How to increase the profitability of selling goods and services

Want to know if the business is successful? Check the return on sales. This is the indicator that determines the percentage of net income from total revenue after deducting all expenses, including taxes. If it is high, the prospects are good, and you need to develop further. When the figures do not please, it is worth reconsidering the organization of business processes or even think about the feasibility of continuing the project. What is profitability and how to increase it - we will tell you in detail in this article.

What is the profitability of sales and services?

In simple words, thanks to this indicator, you can determine whether the company successfully manages its money. In addition, the profitability of the business helps to assess:

Whether money and other resources of the company are used efficiently;

• the profitability of an individual product or service;
• the company's prospects in order to make decisions about expanding or optimizing operations;
• inefficient processes and redundant costs;
• how competitive your business is compared to companies in the same field;
• whether the cost of goods or services needs to be adjusted to improve revenue.

Knowing what profitability is is also necessary for external audits. On its basis, investors evaluate the project and determine whether it is necessary to invest in it, and lenders provide a loan.

How to know profitability

To get a calculation of the profitability of sales, you should perform the following actions:

1. Take the net income.
2. Divide this number by the profit from sales, which is calculated before deducting expenses (cost of sales, taxes, rent).
3. Multiply the resulting amount by 100.

If you need to determine the profitability of the service, the formula is a little different:

1. From the income, subtract the cost of production and expenses.
2. Divide the resulting amount by the revenue.
3. Multiply by 100 to get the profitability rate in percent.

The investment has paid for itself, if the resulting amount is greater than zero. The higher the figures, the more successful the company.

The obtained data should be compared with the same period for the previous year to check the dynamics. This will help to take into account the influence of seasonality on trade (for example, profit from the sale of swimwear in summer and winter is different). If the calculation of profitability did not please, it is worth thinking about what goes wrong, and review the process of work.

It is useful to compare your profitability with the average in the industry. The necessary data can be found on monitoring sites - tatista (international data), Ukrstat (national statistics), National Bank (financial indicators) and Minfin (analytics).

Methods of increasing profitability of sales

Know what is the profitability of services and sales is important to develop an effective marketing strategy to interest the client. To do this, you can create excitement around the product, increase its value, offer related products. And of course, do not forget about the development of the company's website. It is the face of the firm, and a lot depends on whether customers will like it.

Increasing the value of a product or service

By tapping into a customer's emotions, you can provoke spontaneous purchases. Do it in different ways:

• make everyone start talking about the product, for example, create interesting positive news around the product;
• create a sense of scarcity of the product;
• make a promotional offer, for example, buy two products and get the third one for free;
• introduce bonus cards.

An interesting trick is to increase the price of the product, even if competitors offer it at a lower price. By doing so, you will demonstrate that your product is of better quality.

Expanding the average check

This indicator reflects how much a customer spends per visit to a store, cafe, beauty salon, etc. To make him buy not only what he came for, but also other products:

• show the client a product that may be useful to him in everyday life;
• offer serious discounts that are valid for a short period of time to increase the profitability of online store sales;
• show sets, the purchase of which is cheaper than buying each product individually.

To expand the average check will help and wholesale prices. For example, offer a favorable price for a package of socks of 10 pieces, because of which the purchase of one pair will be unprofitable.

Selling more expensive goods

You should have in the assortment not only products that are in mass demand, but also their more expensive counterparts. When the buyer comes for the desired product, show not only it, but also an improved model with enhanced features.

Website promotion to increase profitability

The first thing a buyer does when he is interested in a certain product is to enter a query into a search engine. Therefore, if you want to effectively develop your business, you should pay special attention to the development of online store, for which we recommend you to contact the specialists of IT-company MEGASITE. The more people will visit your portal, the higher the probability of purchases.

Working on the site, it is necessary to take into account such points:

• SEO. To make the resource noticed by search engines, you need to offer quality content, competently write keywords (questions that people enter in the search box), meta tags. For the successful promotion of the site must work on the technical aspects, among which the speed of loading pages and adaptability for mobile devices;
• well thought-out interface and user friendliness. Convenient navigation, clear product filters and ease of order placement increase the likelihood of purchase and, accordingly, increase profitability;
• content advertising. Helps to attract additional traffic to the site, especially if it is aimed at a targeted audience interested in your product. This helps increase conversions and boost profitability.

And of course, do not forget about tools that track user behavior. This will allow you to detect the problem in time and fix it. For example, if it turns out that many customers leave the site at the checkout stage, it may mean that for some reason they can not complete the transaction (the cart does not open or payment does not go through).

You can learn more about how to increase the profitability of sales of goods and services with the help of modern solutions from MEGASITE employees. Call our manager and he will answer all your questions!