You’ve worked hard to establish your small business and build a loyal customer base, but now that you’re a midsize business, how do you increase profits to sustain high-quality operations at this size or invest in further growth?

If you are a midsize business owner looking to make your enterprise more profitable, these tips will set you on the right path.

1. Analyze Your Finances

Before you can improve your profitability, you need to know exactly where you stand financially and what your current profit margins are. After getting the books up to date (if necessary), have your account prepare a profit and loss statement for the past year, along with cash flow statements to see the full picture of your business’s finances.

It might be that you have cash in the bank but failed to turn a profit in the past year, or that you made a profit but didn’t keep enough cash in reserve. Calling in financial experts like Focused Energy can help you identify strengths, weaknesses, and opportunities in your finances, develop a workable budget, and identify sources of financing if needed, while you work on your business’s profitability.

2. Reduce Your Costs

To run a more profitable business, you need to reduce costs, increase your revenue, or (ideally) reduce your costs and increase your revenue. In many cases, simply reducing your operating costs will improve your profit margins without any need to lay off employees or raise the price of services or goods.

Improve Efficiency by Eliminating Waste

As the saying goes, “waste not, want not.” By eliminating wasted time, money, talent, and resources and improving operational efficiency, you can save money and increase your profits.

Ideas for Improving Time Efficiency

  • Identify and eliminate all unnecessary tasks performed by employees (and yourself).
  • Identify and resolve bottlenecks in the company’s workflow.
  • Replace meetings with emails, where possible.
  • Make sure each employee has the right tools to do his or her job and that these tools are in good working order.
  • Authorize capable employees to make decisions (within reason) without having to consult with a supervisor each time.
  • Synchronize information across channels with an inventory and order management software system.

Ideas for Improving Resource Efficiency

  • Stop printing (and filing) anything that doesn’t need to be printed (and filed).
  • Buy reusable materials instead of disposables.
  • Find ways to reuse, resell, or recycle excess raw materials and turn them into revenue.
  • Sublet any areas of the building that aren’t being used.
  • Fix anything in the building that’s broken.
  • Turn off and unplug devices when not in use.

Ideas for Improving Talent Efficiency

  • Identify your employees’ personalities and talents and utilize them to the full.
  • Upskill your existing employees in their areas of interest.
  • Provide specific, timely feedback to help employees improve performance.
  • Offer bonuses for meeting and exceeding goals.
  • Express appreciation frequently to help your employees feel valued (and improve employee retention). Studies show that recognizing employees can increase motivation and improve performance across the organization.
  • Offer flexible time and work location arrangements (such as part-time arrangements and telecommuting) to help each employee do his or her best work.
  • Set SMART (specific, measurable, achievable, relevant, time-bound) goals with your employees and hold each other accountable.
  • Have a clear process for addressing consistently low-quality work.

Ideas for Improving Economic Efficiency

  • Cancel subscriptions, services, and utilities that aren’t being used.
  • Shop around for the best deal as far as mortgage repayments, business loans, merchant credit card processing fees, shipping, and utilities.
  • Negotiate with suppliers. You can often secure lower rates if you pay upfront and in full, guarantee a minimum order value, buy in bulk, or accept a longer contract term.
  • Look for new suppliers to replace those that are unreliable, too far away, overpriced (and won’t negotiate), or can’t offer you a wholesale price.

Outsource Where Appropriate



Outsourcing specialized or time-consuming tasks to a third party can improve efficiency and free up your time to focus on your business. Consider outsourcing tasks such as:

  • Marketing
  • Bookkeeping and accounting
  • Graphic design

Freelancers and contractors can be a great resource if you have an unusually busy period or need specific expertise for a particular project. You’ll save on costs like Social Security and unemployment tax when the scope of the work really doesn’t justify employing someone full-time.

3. Increase Revenue

After optimizing your operational costs, you can work on growing your revenue by increasing sales. First, focus on increasing the revenue from your existing customers. Then, look at attracting new customers to your business.

Improve Customer Retention

Loyal customers are the bread and butter of your business, and growing a loyal customer base not only saves money in attracting new customers but can help you make more money if you can offer excellent value.

To retain existing customers:

  • Reach out after a sale to see how the customer is doing with the products and services and to ask for feedback (and a review!).
  • Resolve any issues with orders and shipments straight away.
  • Respond politely and helpfully to customer compliments and complaints.
  • Offer maintenance contracts and warranties to extend the customer relationship.
  • Offer a loyalty program to incentivize customers to keep coming back.
  • Send reorder reminders to encourage customers to purchase from you again.
  • Notify subscribing customers of new seasonal products, specials, and discounts with email marketing.
  • Develop a subscription business model to generate monthly recurring revenue from customers who regularly use your products. Research shows that offering subscription memberships increases customer purchases.

Increase Your Average Order Value


Once you have established a loyal customer base, you can work on increasing the average order value. If you have 200 customers that happily spend $50 each month (for a total of $10,000 in revenue), increasing the ticket size to $75 automatically increases your revenue by 50% without a corresponding increase in marketing costs.

To increase average order value:

  • Establish minimum order thresholds for free shipping, free gifts, and loyalty points.
  • Offer cross-sells (related products) and upsells (an upgraded version of the same).
  • Offer subscription ordering for the products the customer already buys.
  • Offer new, related products and services that customers can buy from you instead of from someone else.

Review Your Pricing

It’s not always necessary to increase your prices to make a larger profit, but if you haven’t reviewed your pricing in a while, it might be time to give it a look. Your prices should be high enough to:

  • Cover the cost of goods sold
  • Cover free shipping, discounts, coupons, and loyalty perks
  • Cover taxes that aren’t added at the checkout
  • Cover credit card processing fees
  • Show the customer that your products are of a high quality
  • Leave you with an acceptable profit margin

Pricing your products too low can lead to small profit margins, lower customer esteem, and a devaluation of your industry. Pricing your products too high can turn customers away. Find that sweet spot and you can be confident that both you and your customers are getting a great deal.

Make the Most of Your Marketing Dollars


Attracting new customers is essential to continued growth and can increase sales if you do it right. Even though your business isn’t brand new, you still need to spend money to expand your base of potential customers and replace past customers that no longer buy from you.

To make your sales efforts as effective as possible:

  • Develop an “ideal customer” profile and market to them.
  • Find out where your potential customers hang out (on Facebook, Tik Tok, the local sports club, etc.) and focus on those platforms.
  • Create a professional website with high-quality product photography.
  • Invest in search engine optimization and content marketing to educate your audience and meet potential customers at all stages of the buying journey.
  • Offer a free resource or “lead magnet” (such as a report or white paper) for new subscribers to build your email list.
  • Have a clear follow-up process for new subscribers, new customers, abandoned carts, online purchases, customer feedback, and inquiries.
  • Highlight social proof on your website, including ratings, reviews, and testimonials.
  • Create social media accounts to build brand awareness and connect with your audience.
  • Select key performance indicators (KPIs) to measure and monitor your progress and identify which marketing strategies have the highest conversion rates.

4. Expand Your Operations

Once you’ve optimized your expenditure and worked to increase your revenue, you can start thinking about expanding your operations into new markets and channels (such as in-person or online).


Before opening a new location, reaching out to a new sector of the population, or opening an e-commerce store, it’s important to conduct thorough market research to find out what the current market saturation is, the characteristics of your new target market, and whether there is sufficient demand.

To test the waters with a minimum of risk, consider one-time joint ventures with complementary businesses. To make sure the collaboration is a positive experience, establish clear cost and revenue-sharing agreements from the start and do your due diligence to make sure that the company with which you collaborate has a stellar reputation among the customers you want to reach.

Increasing Profitability Might Be Easier Than You Think

As a business owner wondering how to improve midsize business profitability, it can be encouraging to know that increasing your profit margins is often more straightforward than it looks.

Unlike small businesses, which are generally looking at an initial period of loss, you are already established in your niche and have the experience you need to move forward. Now, it’s a matter of seeing where you can cut costs (without sacrificing quality), boost productivity, and maximize your current revenue streams. Once you’re running a tight ship at full steam, you can confidently expand.