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Ensuring that your business is profitable is about more than staying afloat—it’s about creating a sustainable financial future for you, your family, and your employees. Profits also provide fuel for growth, whether that means hiring more staff, expanding to new locations, or developing exciting new products. 

Profitable businesses find it easier to get loans or attract investors when they need extra capital, too. And without profits, even the most passionate entrepreneurs eventually run out of resources.

Despite the need for profitability, small businesses often deal with profit margins that make it difficult to be successful, especially in an environment in which costs keep rising.

The good news? You don’t need to be a financial expert to improve your profits. Here are five practical ways to boost your bottom line.

5 tips for boosting profitability

1. Know your numbers

Simply stated, profit margin is the amount by which your revenue from sales exceeds your costs. Many small business owners have only a vague idea of which products or services actually make money and, as the old business saying goes, you can’t improve what you don’t measure. 

Understanding your profit margin is simpler than you might think:

  1. Calculate your profit: Sale price minus all costs
  2. Divide your profit by the sale price
  3. Multiply by 100 to get a percentage

For example, if you sell a product for $100 and it costs you $60 to make and deliver it, your profit is $40. Divide $40 by $100 and multiply by 100 to get a 40% profit margin.

Action step: Choose your top five highest selling products or services and calculate the profit margin for each. You might be surprised to discover which items contribute most, or least, to your bottom line. Then, with this insight, plan ways to build their sales through marketing initiatives and promotions.

2. Price your products right

Many small business owners make costly pricing mistakes that hurt profitability in the short term and sustainability and growth for the long run. Here are several of the most common:

  • Setting prices based primarily on what competitors charge
  • Undercharging because you’re afraid customers won’t pay more
  • Neglecting to include all costs—like packaging, delivery, and even your own time—when calculating prices
  • Keeping the same prices for years despite rising costs
  • Offering too many discounts that eat into your profits
  • Focusing on being the lowest-priced option instead of showing your value
  • Not doing a pricing-strategy review on a regular basis and/or when your costs rise

When setting prices, research what similar products or services cost in your market, but don’t stop there. You need to understand your own costs—both fixed costs like rent, salaries, and equipment, and variable costs like materials and labor that change based on how much you sell.

Remember that customers don’t just buy on price—they buy the quality, convenience, brand associations, and the overall purchase experience you offer. Don’t be afraid to charge what your products or services are truly worth.

And if you need to raise prices? Now might be the perfect time. Consumers understand that costs are rising and while they may not love price increases, they tend to expect them in today’s economy.

Action step: Review and adjust prices on your lowest-profit items this week. This will boost profitability if/when they sell or help clarify whether these items should be continued.

3. Cut costs without compromising quality

For most businesses, operating expenses tend to be an area in which cost-creep sets in.What seem like relatively minor (or necessary) expenses at first often just become habitual payments, even when they don’t support key operations, services, and profitability. 

Most small businesses have three major expense categories:

  • Labor costs (your staff)
  • Inventory or materials (whatever it takes to produce your goods or services)
  • Overhead expenses (your rent or mortgage payment, utilities, equipment, etc.)

To reduce waste in operations, start by reviewing your recurring costs like subscriptions and underused software licenses. These expenses are often overlooked and easy to trim.

Next, look at inventory. Overstocking ties up cash and can lead to waste. If relevant to your business, consider just-in-time inventory practices and use stock-tracking tools to keep inventory levels optimal.

Identify tasks that take too much time for too little return and find those that can be automated through software programs or outsourced so that your team can focus on revenue-generating and/or high-impact activities.

Also, when negotiating with vendors, don’t be afraid to ask for better terms. Your business may represent an important part of their income, giving you more leverage than you realize.

Action step: Identify three expenses you can reduce this month without impacting quality.

4. Sell more to current customers

It’s much easier (and less expensive) to sell more to existing customers than to find new ones. Your current customers already trust you and understand your value.

Here are simple ways to encourage larger orders:

  • Create a minimum order amount for free shipping or delivery
  • Offer quantity discounts (buy more, save more)
  • Implement tiered pricing in which buying in bulk costs less per item
  • Send personalized offers based on previous purchases
  • Add product recommendations at checkout (“You might also like…”)
  • Create a loyalty program that rewards bigger spending
  • Include small free gifts or samples with orders over a certain amount

Product bundles can be especially effective. Group complementary items together at a slight discount compared to buying them separately. This increases your average order value while giving customers the feeling they’re getting a deal. Also, if relevant for your products and services, create subscription options to encourage regular repeat business.

Action step: Create one new bundle offer or subscription this week with your most popular products or services.

5. Measure what matters to drive profit growth

You don’t need complex analytics to track your business’s financial health. Focus on these three key numbers:

  • Cash flow: The actual money moving in and out of your business—positive cash flow gives you the flexibility to make profit-maximizing decisions
  • Profit margin: The percentage of each sale that’s profit—as we discussed above, tracking this helps identify which products or services deserve more of your attention and resources
  • Customer acquisition cost: How much you spend to get a new customer—lowering this directly increases your profit on each new sale

Ideally, review these numbers weekly to catch profit leaks early. At minimum, check them monthly and again during peak sales periods. Every business has different cycles (holiday season, back-to-school, summer months), so know yours and pay extra attention during those times.

Watch for warning signs: If something feels off—like unexpected expenses or slowing sales—trust your gut but verify with data. Pay attention to patterns in customer complaints or recurring problems that point to deeper issues. And always keep a close eye on cash flow—even businesses with good sales can struggle if money isn’t managed properly.

Action step: Set up a monthly “profit check-up” to review these key numbers and make adjustments as needed.

Grow America can help you build profitability

As you challenge yourself to implement at least one tip from this article this week, remember that even small steps move your business toward greater financial stability and success—including supporting your mission, your customers, and your community.

For additional actionable tips to strengthen and grow your business, take a look at Grow America’s resources to support small business success.