2. how to improve profit

How to improve profit

Specification detail• Cutting costs and increasing revenues, and

the impact of price changes on profit

Managing tough times• John Lewis: Here

Momma Cherri’s Soul Food Snack

How to improve profit•1.Reduce Costs•2. Increase revenue•3. By expansion

Reducing Costs• If costs reduce, then profits should increase?• You could• Reduce your workforce by • Losing workers• Reducing managers or highly skilled individuals who get paid

the most• Automate some jobs

• Contract out the work to others• Cut wages• Buy cheaper stock• Order in bulk

What else could be done?

Increasing Revenue• To increase profit you could :• raise prices• Increase sales (increasing the volume of sales)• Advertising• Sales promotions• Attracting new markets• Reducing Prices

• Introduce new products

What else could be done?

By expanding• Profits could increase by expanding your firms ability to

make more revenue (p313 – read)

• Internal expansionopening a new location to do the same as you do.

• External expansionTaking over another firm combining businesses.

TASK: what ways could profit be increased for these business owners?• Toni has a fruit and veg shop, he wants to

increase profits over the next 10 years so that he can eventually help his daughter pay for university.

• Sam owns a hairdressing saloon but wants to sell his business to buy and sell real estate. He wants to make as much money as he can in 6 months before he decides to sell the business.

How would decisions for improving profit vary for Toni and Sam?