How to Increase Profits at a Business

Business Profits Made Simple

Lately, I've heard people talking about how difficult business is and the problems one faces when building a company or selecting a stock. I want you to remember to focus on simplicity. Success in business, and thus in investing, comes down to four categories:

1. Increasing total number of customers. You can do this one of three ways:

• Getting more people in your store or institution
• Converting more browsers into customers
• Increasing the rate of re-order from past customers

2. Decreasing costs

3. Increasing average basket price per consumer

4. Decreasing capital requirements so the cost of capital falls, making the business generate higher returns on each dollar invested (e.g., shorting the cash conversion cycle or better managing inventory).

Nearly everything falls into those categories (there are other exceptions, but for 99% of businesses or economic activity, all you have to do is attack those four things and you'll end up making a lot of money if you're disciplined and relentless).

This may seem outside of the realm of ordinary investing but since many people have an enormous investment in a small business, it seemed appropriate to invite you to think differently about increasing your profits.