How to maximize profits?

The best indicator of a company's success is profitability and the increase your profits, which is given by the level of sales, in efficient contrast of costs and expenses, that is to say with the production and the management of the business.

Every company lives in the effective search for how to maximize profits, It is important to know the market, because the success of this business will depend on this, in a growing market, a strategy is applied that allows to take advantage of growthIn this case, by increasing sales, more profits would be obtained, by increasing sales, greater production should be generated, so the company's assets must be managed efficiently. If assets increase, higher production, sales and profits are achieved. This indicates the need to increase the financial appeceament avoiding the risk of insolvency.

A company that seeks to maximize its profits and grow steadily, must work on operational issues such as administrative efficiency of assets, costs and expenses. And financial issues such as: financial leverage and reinvestment of profits.

What is profit maximization?

It is known as the ability of a company to obtain the greatest benefit and performance in its operations.

Every company must make a basic decision for its operation, which to make it simple answers the question, how much to produce? Which cannot be answered with the simple force of desire or need, the answer to this question is related to the cost of the production (direct or indirect) and the one with the price at which what is produced can be sold, which will determine the income of the company.

In this way take decisions regarding production, taking into account the current market price and its production costs, you will be able to obtain the maximum profit possible.

In other words, you can decide how much to produce based on the maximization of the profit you want to achieve, which can theoretically be expressed as follows:

Profit (B) = Total revenue (IT) - total costs (CT)

For the company, the benefits represent its profits and are maximum when a maximum difference between total income and total costs is achieved.

For this, it is important to handle concepts such as marginal income, which refers to the change that occurs in total income, given the unit change in the quantity produced. Therefore, companies to maximize their profit must ensure that marginal revenue is equal to marginal cost.

Ima = Cma

In short, the company maximizes its utility at the point at which it is not possible to obtain an additional benefit by increasing production, since the last unit produced adds the same value to total income than to total cost. The company increases profit when the last unit produced always generates an income more than the additional cost to produce it, which is indicative that the production must increase.

Strategies to maximize the profits of the company

Every company seeks the maximizing your profits for them, strategies are commonly used to retain the largest possible market segment, satisfying tastes and accommodating consumer preferences and other strategies that seek to minimize the costs. Some of these are:

Expenditure cut

• You must analyze the expenses incurred, identify the areas where you are spending the most and find a way to reduce a little those that can be reduced.

Production and warehouse optimization

• Analyze the costs of the manufacturing process in order to optimize operational efficiency.
• Consideration of obtaining equipment and machinery that reduces production times, consumes less fuel or electricity or generates a change that optimizes production.
• Keep track of the costs of raw material and looking for the lowest possible cost, maintaining a stable relationship with the supplier can help to get better prices.
• Maintain a constant evaluation of the warehouse costs In order to determine which products take the longest to come out and which stagnate then make any necessary adjustments to production.

Price and / or quality

• Emphasize production in the area that generates the highest income.
• Seeking customer retention for this, the quality of products or services must be optimized, creating a good reputation that the consumer appreciates and values.
• With better quality, the price of the product can be increased since the product is superior to the others.

Outsourcing or outsourcing

• The company must analyze the advantages and disadvantages of outsource areas (outsourcing) that are not your strong suit, this can help you reduce costs.

Marketing plan optimization

• Determine the areas of greatest value for the business and focus advertising efforts on this.
• Development of a social media platform, this currently generates a lot of publicity at the lowest possible cost.
• Development of programs where it generates benefits to current customers by volume of consumption, by referrals, among others.