One of the keys to the success and duration of any company or business is found in its cost effectiveness. And it is that a profitable company is considered when it generates utility or benefits; this means, when the income is higher than the expenses. The profit is expected to help with reinvestment and shareholder satisfaction.
In the case of Peru, according to the National Institute of Statistics and Informatics (INEI), during the first quarter of 2022, 9,302 companies that stopped operating due to the closure or definitive cessation of their activities throughout the country were discharged. .
Where among the main factors, is that they were not companies profitable enough to continue in force for more years. This context Mario Roncal Zolezzi, director of the School of Administration of the Antonio Ruiz de Montoya University (UARM), shares advice on how to increase the profitability of a company:
1. ASSESS THE PROFITABILITY OF THE BUSINESS:
Having an innovative or trendy idea is no guarantee of the success of a company. The profitability of the business results from dividing the profit obtained (or that is expected to be obtained) by the investment made (or that is planned to be made). If the investment flow generates a positive balance in the estimated time, the investment could be profitable. Another important topic of analysis is the cost-benefit, which would determine the possibility of investment, in which it would be estimated if the project effort is convenient and convincing.
2. IDENTIFY BUSINESS SOURCES:
It is important to identify which are the most profitable sources of income for the business, that is, to recognize from which products or services the company’s highest income comes and where the losses come from. Once the analysis has been carried out, it is time to set an action plan focused on each of them, in order to keep active the sources that give the greatest benefits and act on what is stagnant or generates losses for the business. For this you must make a cost of each one.
3. IMPROVE LOGISTICS AND MODERNIZE IT:
According to the business category, improving processes and logistics will always help to achieve better results. New technologies and the modernization of the company represent a necessary investment in the digital age in which we are immersed. As well as investing in suppliers that facilitate the delivery of the product, as well as customer service is essential. This will not only attract more customers, but also improve the perception and reputation of the company and this translates into an increase in income.
4. TRAIN THE HUMAN FACTOR:
Productivity directly influences profitability. This aspect goes hand in hand with the human factor, where training employees and giving them incentives will make them commit to getting more involved with the company and better results will be obtained. Efficient workers, with the necessary training to perform the different functions, is a guarantee of success.
5. COMMITMENT TO SUSTAINABILITY:
Today’s society increasingly takes into account the social and environmental commitment of companies. It is no longer enough to have a good product or good service, but you have to show your values and that these are aligned with the improvement of the environment or society. This can not only attract more users, but also give you an attractive profile for investors.
6. REDUCES UNNECESSARY COSTS:
To be profitable, you have to manage your resources well and manage to place profits above expenses. Reducing costs is one of the necessary steps for any business looking for improvements. These can range from: improving processes, getting rid of machinery that consumes too much or needs constant repairs, among other aspects to be evaluated.
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