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Businessman composing a successful financial chart with arrow going up, he is using green paper cuts, eco business and financial success concept
An MBA graduate or accountant that has a profound accounting and financial knowledge may be able to state a clear-cut distinction between the terms profits and profitability. For a businessperson, it is not that hard either. We know that any business stands strong in the market because of the profits it makes. When it comes to business growth and expansion, these two terms play an influential role in defining what’s suitable and what’s right for a company—whether the financial grounds or bookkeeping records are favorable or not. One thing is very clear, regardless of size, businesses need to track their profit margin in order to make wise financial decisions that are important in strategic terms.  

The Basic Difference—Profit vs. Profitability

Profit and profitability are two terms that are often used interchangeably, however, they are not the same. The interpretation of both terms is different and those who are able to interpret them correctly can expect to witness financial success of a company. To determine whether a company is financially sound or not, business owners and investors need to track the company’s profit from its profitability. To keep the business afloat, you need to ensure a smooth working capital and cut business costs and expenses as much as possible. In simplest terms, whatever amount is left after subtracting the total expenses from the total revenues is profit. Similarly, the profit margin is the ratio between the net income and total sales as it is measured as a ratio or percentage.

Defining a Company’s Profit

If we go deep into the application of calculating a company’s profits and you are a professional accountant or bookkeeper, it won’t be hard. You need to sum up or add the total revenues and subtract the total expenses to get the amount of total profit. The point is, profit is an absolute term and we have a simple formula for calculating it.

Total profit= Total revenue – Total expenses

Evaluating Profit in Business Perspective

When we evaluate the term in a business perspective, we know that a company’s core objective is always to make a profit. Without making a profit, no company can survive in the market for long. Obviously, what is earned is invested back into the business and a company will grow slowly and gradually. But, the point is, profit alone as a measure of success can be deceiving. There are different routes to calculating a profit margin and business owners need to note minor cost shifts. The bottom line is, your income statement shows you whether you are making a profit or not. If the results are negative figures, you need to cut or readjust your business expenses or costs in order to ensure a profit.

Defining Company’s Profitability

The application for calculating profitability is a bit more complicated than calculating a normal profit. It involves percentages or ratios which show that profitability is the measurement of profit. Business owners need to ensure that their profitability index is positive in order to yield enough profit to sustain and grow, especially when the market competition is intense. A business requires careful financial tracking and controlling.

Profitability is the degree to which a business yields a financial gain. Although the company may be showing or realizing a profit margin and figures may seem to be attractive initially, this doesn’t necessarily mean that the company is profitable. Profitability is matched and contrasted against many aspects of the business; you must learn the art of the game before calculating the exact profitability index for your firm. Since profitability is the relative amount (a ration or percentage), it shows or expresses a ration between profit and revenue. The formula for calculating profitability or profit margin can be:

Profitability= Profit/Revenue* 100


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About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual accounting, providing services to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud-hosted desktop where their entire team and tax accountant may access the QuickBooks file and critical financial documents in an efficient and secure environment. Complete Controller’s team of  US based accounting professionals are certified QuickBooksTMProAdvisor’s providing bookkeeping and controller services including training, full or partial-service bookkeeping, cash-flow management, budgeting and forecasting, vendor and receivables management, process and controls advisement, and customized reporting. Offering flat rate pricing, Complete Controller is the most cost effective expert accounting solution for business, family office, trusts, and households of any size or complexity.

 

 

Leerer Einkaufswagen im Supermarkt
Grocery store owners have gradually learned to create clear points of differentiation; this step is important for establishing their prices and value based services. Most retailers have faced several challenges to maintain their cost and profitability, especially if the economy is in recession. Some of the challenges faced by grocery store owners are related to competitive markets, establishment of mega stores like Walmart and Target, recession, and fluctuating incomes of the general population.

Small grocery stores face some tough competition from rival companies with supermarket and store chains spread across the country. Store owners are finding it hard to cope with the tough competition from rival stores with better resources. The article reflects on the various challenges small grocery store owners face and how stores can overcome the challenges affecting their profitability.

The Plethora of Competitive Retail Mega Stores

Grocery stores in the same locality have been each other’s competition for a long time, but these small stores rarely pose a threat to the other’s profitability. However, it’s a completely different scenario when store chains pop up in the neighborhood to grab the attention of the same customers. On the other hand, customers are willing to go to stores because large store owners offer products at slightly cheaper prices. 

The larger department stores have an option to reduce their prices to give them a significant advantage over small to medium sized retailers. To overcome the challenge posed by large retailers, grocery store owners can target a specific niche and cater to that market.

For example, providing specialty items that large retailers fails to provide. Small retailers can carry items that a specific demographic finds appealing. This could help a small grocery store owner get back a significant market share.

Reduce Resources and Streamline Operations

Mom and pop grocery stores spend more resources than large retail stores which significantly reduces their profitability. To increase their profitability, small grocery store owners can get a chance to cut back on their expenses. Cutting expenses is possible by streamlining store operations; they can do so by hiring qualified employees.

Stores can overcome profitability challenges by merchandising the shelves and making shopping carts available for customers as they arrive at the store. They can invest in a cart system that requires shoppers to put in cash and the amount is refundable to those who puts the carts back. Such a system would streamline the process and use limited resources and human capital. 

The Cost of Labor

Grocery stores have a lower profit margin compared to large retail stores chains. To improve their profitability, grocery store owners must rely on different ways to reduce their operations. The cost of labor is one of the biggest expenses that grocery store owners have to cover. However, grocery stores can control their labor costs.

The cost cutting must not be so extensive as to hurt the daily operations of the store. For example, cutting labor costs to an extent that there’s no staff to clean up, arrange the shelves, or cater to the customers.

Training employees to perform their duties correctly can overcome labor costs. A fully trained employee will be able to handle their responsibilities better than untrained staff. Employees will be able to complete things quickly and efficiently.

Get Rid of Unproductive Processes

Unplanned processes are often counter-productive; grocery store owners need to get rid of any unproductive processes that do not add much to the profits. Perform an audit and see what products sell out slower than the rest. Removing these products from shelves will help get rid of the entire supply chain that costs the store more, bringing in much needed profits.

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About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual accounting, providing services to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud-hosted desktop where their entire team and tax accountant may access the QuickBooks file and critical financial documents in an efficient and secure environment. Complete Controller’s team of  US based accounting professionals are certified QuickBooksTMProAdvisor’s providing bookkeeping and controller services including training, full or partial-service bookkeeping, cash-flow management, budgeting and forecasting, vendor and receivables management, process and controls advisement, and customized reporting. Offering flat rate pricing, Complete Controller is the most cost effective expert accounting solution for business, family office, trusts, and households of any size or complexity.

 

 

 

 

 

Young woman is choosing toothbrush in supermarket.
All retailers need a pricing strategy for their retail products, however, for many inexperienced retailers, this can prove to be a tiresome task. After thorough research and trials, you may be able to set an optimum price. High prices will give you higher profit margins but can affect your sales. Similarly, low prices can boost your sales but you may not make enough money to balance it out. So, the dilemma is to find that perfect middle spot for profitably pricing your products.

There is no right or wrong way to pricing and, depending on your business model and type of product, you will need to set a pricing strategy accordingly. The two basic factors that you must incorporate into your pricing are the cost of goods and operating expenses. The cost of goods includes any cost that you bear while acquiring or manufacturing the product plus any additional shipping costs. Operating costs are associated with your payrolls, marketing costs, and other overhead costs.

Strategies to Price your Retail Products

MSRP

The ‘manufacturer suggested retail price’ is exactly what the name suggests. The manufacturer of a product sets a standardized price for multiple retailers. The bargaining power of the manufacturer and exclusivity of the product are the two main factors in setting up the price. Retailers now need not worry about profitably pricing their products as the prices are already set by the manufacturer, saving them a lot of nuisance. However, it is hard to sustain an advantage over your competitors using the MSRP pricing strategy.

Dynamic pricing

A dynamic pricing for your products means that you will need to alter the prices depending on the current market conditions. This type of pricing can be beneficial for you, however, you will need to monitor the market very closely and make accurate predictions constantly. Airlines often opt for a dynamic pricing strategy as it is most optimum for their business model. This allows you to meet real-time customer expectations, however, monitoring the market and correctly predicting it is a tough job and can easily go wrong.

Mark-up pricing

Mark-up pricing is calculated by adding a definitive profit margin to the cost of retail products. Ensure to keep the mark-up high enough to cover any price reductions, discounts, or other scenarios. It is one of the simplest pricing strategies and can be used variably for each product line. This is one of the preferred pricing strategies for retailers as you can set the mark-up at a point that’s optimum for you.

Competitive pricing

Because of the availability of so many options to consumers, they are willing to search the market for the best price. Profitably pricing your products can be challenging in such a competitive market as you have the option to either set your product below or above the competition prevailing in the market.

A below competitor pricing strategy would work best if the retailer is able to negotiate the prices with the manufacturer and is able to reduce the cost. For retail products that are priced above the competition, the retail location must be exclusive and the product quality should be exceptional. Also, the customer service should justify the high pricing and customers should be able to associate a higher value with your products.

Psychological pricing

Have you ever wondered why stores charge $99.90 instead of $100? This is referred to as psychological pricing as consumers are more likely to buy a product in which the price ends with a 9, 7 or even 3. These numbers have proved to appeal the audience as the tendency is to round down the price to $99 instead of rounding it up.

However, psychological pricing does not work well with high-end products as it gives away a cheaper perception. Psychological pricing is a useful way of profitably pricing your products and keeping your customer satisfied at the same time.

Discount pricing

There is no doubt in the fact that everyone loves sales and discounts. Sometimes the situation demands you to opt for a discount pricing strategy. Seasonal discount offers are quite prominent as consumers are able to buy products at a discounted price and retailers are able to offload the inventory. A large number of customers are attracted to the store when you have put the stock on sale. However, sales and discounts should only be used occasionally as it can give away a bad reputation for your business. You can be labeled as a bargain retailer and people would not shop at your store otherwise.

Anchor pricing

This pricing strategy for retail products also tends to be more psychological in nature. Both the original and the sale price of the product are listed together for the customer to make a comparison. The original price serves as an anchor for the sale price and customers perceive to have found a great deal. Another tactic is to place a higher priced item next to a cheaper one to attain customer’s attention.

A higher original price compared to the sale price is more likely to result in a sale, however, if the price seems unrealistic and the customer finds out, there is a probability that the situation can turn bad for you.

Conclusion

There is never one perfect approach to pricing retail products and it is recommended that you revisit your pricing strategy from time to time in order to stay germane.

Check out America's Best Bookkeepers
About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual accounting, providing services to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud-hosted desktop where their entire team and tax accountant may access the QuickBooks file and critical financial documents in an efficient and secure environment. Complete Controller’s team of  US based accounting professionals are certified QuickBooksTMProAdvisor’s providing bookkeeping and controller services including training, full or partial-service bookkeeping, cash-flow management, budgeting and forecasting, vendor and receivables management, process and controls advisement, and customized reporting. Offering flat rate pricing, Complete Controller is the most cost effective expert accounting solution for business, family office, trusts, and households of any size or complexity.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

marketing - Complete Controller

Profitability and profit are often used interchangeably, but these two are not the same. Profit is a financial gain when the sum of revenue surpasses the expenses, costs, and liabilities, including taxes.

Profitability is the metric that is used when a company’s profit is measured to the size of the business. Profitability is a relative term and can also be described as the ability of a business to generate a profit on investment according to the resources in business as compared to a different amount of investment made. A business that is yielding a certain amount of profit may not be profitable when the profitability of a business is estimated. Check out America's Best Bookkeepers

Sustainable marketing tactics must be used since the startup of any marketing campaign. This will make sure a business is long-lasting and successful. This will also ensure profitability in the long run. Marketing is an investment tool. Marketing attracts more customers, notes feedback, and responds to customers on their queries and expectations.

The promotion of a product using different media platforms is an often-used marketing campaign. The marketing campaign is not an advertisement alone. Other interactive techniques are used in marketing. Markets with high competition need a lot of marketing campaigns for brand awareness and promotion of sales to sustain profitability.

Marketing Campaign to Maximize Profitability

Marketers ensure sustainability in their marketing campaigns by implementing effective marketing strategies that drive profitability for the long term. Marketing strategies are activities in the field of marketing to plan and develop market-oriented policies that achieve the goal of a company towards the sale of its product or services. An effective marketing strategy should emphasize on attending to profitable customers, not only adding new customers.

Marketers ensure sustainability in their marketing campaigns by carefully planning before launching a campaign.  They map out the process from the initial promotional method to the final decisive outcome.  


1. Identify and Focus on your Target Audience

First of all, use various platforms to identify your target audience. After determining your target audience, focus on your target audience. Keep in touch with them. Always listen to your target audience. Develop your product or organize the services according to your target audience’s expectations. Your business starts with your customers and ends with them too. Check out America's Best Bookkeepers


2. Develop Marketing Goals

Set goals for the marketing campaign. Start working on how to achieve your goals. Nothing can be done properly without setting aims and goals.


3. Identify Channel for Marketing Campaign

Plan out the marketing channels you will use for your marketing campaign. Media channels that marketers can use for attracting an audience are:

Social media

Websites

Mobile

Email

Search engines

Advertisements

Promotional offers at superstores

Free samples distribution


4. Approach your Customer Whenever Possible

Know when and how you can connect with your customers. Where they hang out, how to approach them, and how to make them feel they are the main focus.


5. Listen to the Feedback

Always pay attention to the feedback of your potential customers on social media. Respond to queries of people on social media who want to know about your product. Develop your product to meet the needs of customers. Check out America's Best Bookkeepers


6. Develop Innovative Marketing Strategies

Your marketing strategy should be unique and innovative.


7. Focus on Existing Customers

In making new customers, never forget your existing customers. They are the reason behind your business success so far.


8. Market for the Right Reasons

Never try to promote a product for the wrong reasons or for the benefits it does not provide. You will lose your credibility forever.


9. Stay Up to Date on Marketing Trends


10. Ensure a Strong Bond with your Profitable Customers


11.  Measure Results

Analyze and measure the results of marketing by measuring the goals achieved. Not only measure the profits but focus on the profitability ration of business before and after the implementation of a marketing campaign. In most cases, the goals are increased sales and increased net profit.


Conclusion

Successful marketers ensure sustainability in their marketing campaigns by carefully planning their campaign from initial promotional methods to the final decisive outcome. Sustainability in marketing ensures building brand image and profitability in the business in the long run.

 

Check out America's Best Bookkeepers About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual bookkeeping, providing service to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud-hosted desktop where their entire team and tax accountant may access the QuickBooks™️ file, critical financial documents, and back-office tools in an efficient and secure environment. Complete Controller’s team of certified US-based accounting professionals provide bookkeeping, record storage, performance reporting, and controller services including training, cash-flow management, budgeting and forecasting, process and controls advisement, and bill-pay. With flat-rate service plans, Complete Controller is the most cost-effective expert accounting solution for business, family-office, trusts, and households of any size or complexity. Check out America's Best Bookkeepers