Improving your EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortisation) is essential for businesses across the UK that wish not just to survive but thrive. If your business can execute an effective business strategy, it will achieve excellent financial performance, profitability, and revenue growth.
Improving your EBITDA will give your greater resources to do this. You can then invest in marketing, staffing, and equipment, as well as give better returns to shareholders and investors.
What Is Your Business’ EBITDA
Your business’s EBITDA is its earnings before interest and taxes. Simply put, it is your profit before interest and tax are added or deducted. If you can improve your EBITDA, you will have more cash to re-invest into your business, allowing you to capitalise on new opportunities, explore new revenue streams, and find new customers.
Many things out of your control can affect your EBITDA, including the condition of the stock market, your industry, region, funding availability, and interest rates. However, there are things within your control that will help you improve your EBITDA.
Tips To Improve Your EBITDA
Here are four tips that will help you improve your EBITDA.
- Maintain your prices
If you discount the price of your services or products, then you are also reducing your EBITDA. If you have been discounting your prices, you can increase your EBITDA by maintaining your prices and instead sell to customers based on the value of your services, products, and expertise.
- Optimise your travel and entertainment budgets
Your business’s entertainment and travel budgets are an investment that should provide a return and increase in revenue. However, if you can still attract business without taking a client out for dinner or travelling to see them face-to-face, then your EBITDA will improve. The current epidemic has shown the business world that virtual meetings and conferences can be just as effective as those held face-to-face.
- Manage your inventory
Poor inventory management will negatively affect your working capital and EBITDA. If you overproduce your product and the inventory sits on a shelf, then capital is tied up while you wait for that inventory’s profit to be released.
- Reduce your costs
If your expenditure is high, it will pay to look at reducing your costs to achieve good EBITDA. However, reducing the quality of the equipment and consumables your workforce uses is definitely something you should avoid. For example, instead of buying cheaper workwear for each employee, you could rent your workwear, and with repairs, replacements, and laundry all handled for you, your costs are reduced while retaining access to the best-quality overalls, uniforms, and PPE. Another example would be to rent items such as industrial wipers, which can also be collected and laundered, rather than purchased, used once, and thrown away.
If you are intrigued about the savings your business can make to improve its EBITDA by renting workwear and consumables, contact Lindstrom’s team for more information.