“Without an understanding of profitability, every business, no matter how successful, is a house of cards.”
— Mike Michalowicz, Entrepreneur and Author
If you want to increase profit in your business, there are only four fundamental levers you can pull:
sell more, get customers to buy more frequently, increase prices, and reduce costs.
If you can improve all four at once, your ability to increase profit will improve dramatically. Even changing just one of these factors can have a meaningful impact on profitability.
Why Increasing Profit Is Critical for Business Growth
The ability to increase profit is essential to the long-term success and resilience of your business. Profits matter because they:
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Provide a return on your investment
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Create opportunities to reward shareholders and staff
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Make it easier to attract investors and customers
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Improve your ability to borrow money and negotiate better interest rates
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Allow profits to be reinvested into new markets, products, and locations
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Create a buffer against economic downturns and market changes
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Make it possible to hire more people and scale sustainably
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Support the development and testing of new products or services
While many business owners experience a decline in net profit margin at some point, they often continue trading with short-term borrowing and aggressive cost-cutting. However, unless you identify what is preventing you from being able to increase profit, the problem is likely to worsen.
Low profits often lead directly to weak cash flow, and when profitability and cash flow both suffer, businesses can quickly fall into a downward spiral.
Understanding the Key Profit Measures in Your Business
Your profit figures show how well your business is performing and where improvements are needed to increase profit effectively.
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Gross profit (revenue minus cost of goods sold) shows how efficiently your business uses resources to produce products or services.
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Operating profit (gross profit minus operating expenses, depreciation, and amortisation) shows how efficiently you run and sell within the business.
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Net profit (what remains after all expenses, including tax and interest) shows how effectively your business generates sustainable results.
To truly understand how to increase profit, these figures must be compared against historical monthly and annual performance. This is where profitability ratios become invaluable.
Profitability Ratios That Help You Increase Profit
Profitability ratios help you evaluate your company’s ability to increase profit consistently over time.
Gross Profit Margin
Gross profit margin (gross profit divided by sales) is a key indicator of financial health. It highlights pricing effectiveness, cost control, and production efficiency.
The higher the gross profit margin, the easier it becomes to increase profit, as more of each sales dollar is retained to cover operating expenses and contribute to net profit.
Operating Profit Margin
Operating profit margin (operating income divided by net sales) shows how much revenue remains after covering variable and operating costs.
This ratio is particularly useful when trying to increase profit, as it highlights whether operating expenses are too high and where efficiencies can be gained.
Net Profit Margin
Net profit margin (net profit divided by revenue) shows how much of each sales dollar becomes actual profit.
A higher net profit margin indicates a business that is more effective at converting revenue into profit. A low margin suggests issues with sales volume, pricing, cost structure, or operating efficiency—all barriers to increasing profit.
The Main Reasons Businesses Struggle to Increase Profit
Falling Revenue
A decline in sales or turnover can be caused by internal and external factors, including:
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Inadequate marketing – marketing must reach the right audience with the right message and drive action
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Poor pricing – prices that fail to reflect value or rising costs
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Inability to keep up with market changes – competitors, technology, or customer expectations
Without addressing revenue challenges, it becomes increasingly difficult to increase profit.
Excessive Expenses
Budget overruns and unexpected costs directly reduce profitability.
When variable costs rise, net profit margins fall. High production or purchasing costs can leave insufficient funds to cover operating expenses. If variable costs rise too far, a net loss becomes unavoidable.
Cost control is therefore one of the fastest ways to increase profit.
How a Fractional CFO Helps You Increase Profit
The CFO Centre provides you with a highly experienced senior CFO with big-business expertise for a fraction of the cost of a full-time hire.
This means you gain access to:
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One of the US’s leading CFOs on a part-time basis
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A local support team of high-calibre CFOs
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A national and international network sharing best practice
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Access to a wide network of clients and partners
With this level of support, you can increase profit faster and with greater confidence, supported by data-driven decision-making and expert financial leadership.
How Your CFO Will Help You Increase Profit
Your fractional CFO will focus on the four proven ways to increase profit:
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Selling more
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Encouraging customers to buy more frequently
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Increasing prices without losing customers
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Reducing costs without damaging performance
By identifying opportunities across all four areas, your CFO helps unlock sustainable profitability improvements that support long-term growth.
To find out more, visit our Profit Improvement page.