Every founder wants their business to earn more. That is the essence of entrepreneurship. Yet sometimes, it seems like you are doing everything right, while profits keep falling. At the same time, processes and sales volumes may remain almost unchanged.
I have faced this situation myself and created my own checklist of what to look at if you want to increase profitability.
First, optimization becomes a task for the entire company. Every department gets involved in the process and looks for opportunities.
In a crisis, employees need to understand that the company’s resilience depends on this kind of reset.
Start with costs. Where exactly is the company losing money?
I recommend looking for the “devil” in the details.
After an internal review, our COO manually went through the key expense items. Within a month, this brought the company thousands of euros in additional savings.
So, where did we find unnecessary costs?
Intermediaries
It often seems that intermediaries are necessary because they help find the best option and simplify communication with suppliers. Meanwhile, the business gets used to certain terms: the route, the contact person, the procedure, the package of documents. And for years, everything continues to work by inertia.
When planning optimization, it is worth asking several questions:
Can we buy directly from the manufacturer?
When was the last time we reviewed our terms with the supplier?
Are there alternative contractors on the market?
Has the familiar setup become too expensive?
Going directly to the manufacturer is not always easy. There may be existing agreements, reluctance to work with a new counterparty, or legal nuances. But if such a change brings an economic effect, it is worth working through.
Logistics
If a company has been working with the same carriers for years and has not reviewed the terms, it may be overpaying not because of the objective market situation, but because there is no competition among contractors.
In our case, introducing a tender system among road carriers helped reduce transportation costs.
This does not mean that a business should always choose the cheapest offer. In logistics, reliability, deadlines, responsibility, and predictability matter. But market comparison should be regular.
Certification and document flow
During the review, we found that the company was paying extra for certificates for each delivery of raw materials, including certificates of origin. These costs were perceived as part of the usual process, although in reality they required a separate check.
Eventually, we negotiated with contractors and argued that such documents should be included in the standard package provided by the manufacturer or raw material supplier, rather than becoming an additional cost for the buyer each time.
This helped the company optimize another expense item.
Review the team’s functional workload
Amid the talent shortage, finding new people often seems like the number one task. And for some specialists, this is truly the case: without the right expertise, the business will not be able to move forward.
However, not every role requires narrow, specific knowledge. Some functions can be redistributed among existing employees without hiring a new person.
Of course, this must be done fairly: with additional pay, a clear workload, and without turning optimization into overwork.
This approach gives the business a double effect: the team receives additional motivation, while the company saves time and resources on finding a new employee.
Funding the business
Using your own money often seems like the safest resource, but for a company it can be the most expensive one. If a business funds its development only from its own cash, it may lose speed: buying equipment more slowly, expanding production more slowly, and postponing decisions that could strengthen the company.
That is why it is worth looking at alternative resources: government programs, preferential loans, grants, and partner investments.
Loans can also be a useful tool, but they should not be treated as a universal solution. Borrowed money should work for development, not cover operational mistakes.
We have an internal limit: credit funds may reach approximately 50% of working capital, but we try not to go above this threshold. This is not a universal formula for every business, but for us it works as a disciplining benchmark.
Consider partnership as a way to strengthen the business
During crisis periods, a business may lack not only money, but also experience, competencies, market access, management expertise, administrative support, or strong contacts. In such cases, partnership can be just as important as financing.
A strong partner can bring a new perspective on the product, help enter another segment, strengthen management, or close the gaps that the company cannot quickly cover internally.
Attracting such a partner is not easy, especially if the business is already going through a difficult period. But it is possible if the company has assets, a product, a market, a brand, or a prospect that the other party understands.
Partnership should not be an act of desperation. It is a strategic decision: who exactly we bring in, what problem we solve, and what value both sides receive.
Check whether the current model has exhausted itself
Sometimes cost optimization does not solve the main problem. If the market has changed, the product has lost liquidity, or the margin has become too low, the business will have to reconsider the very direction of its activity.
One of my first businesses was related to automotive equipment and accessories. When the exchange rate changed sharply, products purchased in dollars became significantly more expensive for customers. We tried to adapt, but we saw that this direction no longer worked at its previous volumes.
The company had to be repurposed. Eventually, we found a new direction and preserved the business.
The critical marker here is dynamics. If, over six months, the business shows a negative trend and there is no realistic recovery scenario, it is necessary to honestly assess whether it makes sense to keep investing resources into the old model.
Repurposing is always difficult. It involves losses, new competencies, changes in processes, and sometimes new people. But it can become a lifeline.
The purpose of business is to generate profit. And the higher this profit, the more opportunities the company has: to invest in development, strengthen the team, launch new directions, and get through difficult periods without critical losses.
That is why process review should be a regular management practice, not a reaction to crisis.
At the very least, it helps keep your finger on the pulse. At best, it helps uncover hidden reserves that can save the business thousands of euros.