3 Unusual Ways to Increase Profit in 2021
Most business owners think there are only three ways to increase profits: work more, sell more or produce more.
But what if the key to a bigger bottom line wasn’t about doing more but “changing habits” instead?
Forget the traditional approach. Here are three unusual ways to increase profit in 2021.
- The Small Plate Strategy
- What to Expect when You’re Expecting Results
- Stop Taking Shortcuts
1. The Small Plate Strategy
British author and naval historian, C. Northcote Parkinson, said “work expands so as to fill the time available for its completion.”
Now that might sound a bit confusing, but it’s about managing time and maximizing effort. And it’s the secret to establishing better margins for your business.
Think about the last time you ate dinner at a buffet or went to a big family picnic.
You probably grabbed the largest plate and filled it with all your favorite foods. By the time dinner is over, you’ve consumed a lot of calories and regret not wearing loose-fitting pants.
However, if you had simply used the smaller plate, you wouldn’t have had room for that extra helping of mashed potatoes. As a result, you would have consumed fewer calories and wouldn’t feel so stuffed.
Smaller plates mean less consumption.
That’s true in business too.
Give someone an hour to complete a task and they’ll take the full hour. Give someone 30 minutes to complete the same task and they’ll get it done.
The Small Plate Strategy is a take on Parkinson’s law: If you run your business with a large budget (large plate), you’ll spend more money. If you run your business lean and set a tight budget (small plate), you’ll spend less. If you only have $10 in your pocket, you can’t spend $12.
Apply the Small Plate Strategy to your business finances if you want to increase profits.
If you give yourself a small plate (budget), you won’t consume as many calories (waste money). And you won’t walk away from the buffet feeling bad about overeating — or in this case, overspending.
2. Managing Expectations Produces Better Results
Do you tend to settle for whatever your team produces? Most entrepreneurs and business owners do.
They silently accept mediocre sales reports. But end up stewing over the lacklustre results back in their office. Who’s to blame in this situation?
As the leader, it’s your job to set expectations for your team and communicate them clearly.
This doesn’t come naturally to all business owners. It’s a skill set you need to practice.
Start by looking inward. Are you letting yourself off the hook when you don’t do your best work? Are you holding yourself to the highest standards that will produce the highest results?
Once you’ve set high expectations and standards for yourself, it will be easier to do the same for everyone else. Raise your expectations and then relay them to your team. When your employees know what to expect, they do better work. And when they do better work — you guessed it — profits increase.
Stop Taking Shortcuts
Some shortcuts are amazing. When you find a detour to avoid a massive traffic jam, that’s an awesome shortcut. When you use an Instant Pot to make dinner in 20 minutes, that’s an awesome shortcut.
But there are plenty of times when a seemingly useful shortcut costs us in the long run.
If you want to increase profits, stop taking shortcuts with your cash management.
Businesses that implement the Profit First method split their finances into multiple bank accounts. The main accounts include profit, taxes, owner’s pay and operating expenses.
Even with these guardrails in place, it’s tempting to take shortcuts. At first it feels like a waste of time to move money from one account to another instead of just parking it all in one bank account.
But this isn’t a system designed to waste your time or cause frustration.
You’re actually building muscle memory. You’re developing a habit and helping your brain understand the actual flow of cash. Follow the path, avoid costly shortcuts with cash management and watch your profits increase.
Think about it like this: imagine you have an envelope set aside with money for your mortgage payment. You have another envelope for food and another envelope of money for the car payment. When it’s time to pay the mortgage, you don’t take from the food envelope.
It’s the same for your business. You need separate buckets so you can see how money is flowing into the business (income) and how it’s flowing out of the business (expenses).
Entrepreneurs do a pretty good job of keeping track of their income buckets. They want to know which source or sources created the income. But when it comes to spending, they toss all the money in one bucket and then spend money on whatever the most urgent need of the day is.
You’re grabbing extra cash because you make it available. Then you wonder why you don’t have the funds to pay rent or reinvest into growing the business. You took a shortcut with cash management.
Summary
When you were thinking about ways to increase profits in 2021, these three ideas probably weren’t on your list.
But remember, boosting your profits isn’t always about doing or producing more. It’s about strategy. It’s about putting the principles and habits into place that set you up for long-term success.
Give yourself a small plate. Establish a smaller, leaner budget and you’ll spend less. Review the expectations you’ve set for yourself. Then raise those expectations and communicate them clearly to your team. Finally, avoid the temptation to take shortcuts with cash management.
Trust the ProfitFirst method. Keep your money in the designated accounts. At the end of the day, you’ll have a much better handle on your finances — which will lead to increased profits.
The financial health of your business is a measurement of your overall business health. If your business is financially strong and profits are increasing, you’ll be able to do more for your employees, your clients and yourself. And that sounds like a pretty great 2021.