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Whether you operate a startup or a multinational corporation, your future depends upon sustaining strong profits. In a competitive environment, it takes more than increased sales. Real growth requires adopting strategies that are geared toward improvement of cash flow. Here are a few proven ideas to increase the profitability of your company.
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Merge with Other Companies
A merger is a legal agreement to unite two existing companies into a single larger company. There are several types of merger. A horizontal merger is when competitors unite, while a vertical merger is when two companies making components for the same product combine. Product extension is a merger for companies selling related goods, such as different kinds of power tools. Over 12,000 mergers and acquisitions took place in 2016. One larger company can increase market reach, combine product lines or resources, and create greater value to please investors.
Pick Up New Partners
Your firm may still remain independent, but partner with another company for different initiatives, such as a marketing campaign or physical expansion. A business can also align to minimize costs or share resources that one partner lacks, such as expensive technology or specialized services. An arrangement is reached regarding each partner’s investment, obligations, and returns. Partnerships can be complex situations that call for an experienced business attorney, like those at Stauss Troy. When planned and executed well, however, a partnership will save you on costs while providing mutual profit.
Create a New Product
New product creation is an exciting time in companies of every size. It can be a gamble, as it involves a major effort and a long period of iterative design, prototyping, and testing, as well as scale up to meet demand. In the end, you get a unique product that sets you apart from your competitors and becomes deeply associated with your brand. Successful new products can transform a company’s profitability. The critical step is market research that ensures there’s really a demand for your product at a price that will generate the returns you need to grow.
Develop Payment Agreements
One of the problem many businesses encounter is “deadbeat” clients that are slow to pay, or don’t wind up paying at all. Some clients may threaten your cash flow with cash flow problems of their own. Pursuing non-payers or turning matters over to a collection agency just elevates your costs. Depending on your business, one possibility is to require down payments from customers that you consider risky. Another is to be more flexible in your payment options and terms, so that you have a little money coming in regularly rather than losing profits altogether.
Remember that gross profit margins are the true measure of success. If you’re constantly struggling to make only moderate profit, it’s time to rethink your business model.
