Five Ways to Boost Profits

The same concept can be used in any industry. For a computer store, the giveaway might be an hour or two of a technician's time. For a beauty salon, it might be an eyebrow waxing. Offers like these help draw customers or close sales without taking such a big bite of the profits.

4. Cross-sell/upsell high-profit items. I recently wrote about a hardware store that created a checklist of add-on items like brushes and drop cloths for customers who bought paint. Those items helped increase the profitability of paint sales because they had higher margins. In another case, I worked with a TV store that drove profits to a new level by improving the way it sold service warranties. This skyrocketed from one in 10 customers to one in four, becoming a key profit center.

5. Put your product mix on a diet. Imagine you're a jewelry store with 25% of your inventory tied up in stock that sells once or twice a year. By getting rid of those slow-moving items, you can put the money into merchandise with the highest turnover. The same principle applies to service businesses. If you're a day spa with body wraps that attract only a handful of clients per week, put more resources into facials or other services that will keep your appointment book filled.

There are other tactics you can use, but the key is always to keep your eye on the profit prize. Remember, it's not how much you sell, but how much you earn. Otherwise, when you're out of working capital, you're out of business. If the dot-com companies of the late '90s had kept that lesson in mind, the Internet bubble might never have burst.