How to Increase Profitability: Strategies from CROs for Success

Take a look at any large company strategy, and we guarantee it’ll include a mention of these two things:

☝️ Increasing sales and driving growth

✌️ Managing costs and optimizing efficiency

Bringing in more money and reducing expenses are the two core building blocks of driving profitability. No arguments so far. But with external pressures such as inflation, rising operating expenses, and increased competition for new customers, achieving a healthy bottom line and improving a company’s profitability has never been harder.

If you’re a business owner, executive, finance professional, or Chief Revenue Officer (CRO) looking for new and innovative ways to boost profits, this is the article for you. After we’ve analyzed why achieving profitability is so challenging in 2025, we’ll explore ways to redefine your profit strategy and improve your chances of business success.

TL;DR — Key Takeaways

• In a high-inflationary economy, prices are rising fast, making it harder to drive profitability.
• With the average company’s net margin already squeezed to just 8.54%, reducing your prices isn’t a sustainable way to boost your profit levels.
• The best CROs manage costs by optimizing capital allocation, eliminating resource inefficiency, and implementing automation and data analytics while creating additional customer value through upselling, cross-selling, and bundling products.
• For most businesses, labor costs are the highest balance sheet numbers, so why not use Toggl Track to maximize your team’s productivity?
• Built on accurate time recording data, Toggl Track Insights unlocks crucial data that improves productivity, reduces waste, and drives better allocation of project resources.

Profitability in a challenging economy

Since the COVID-19 pandemic, price increases have put immense pressure on businesses large and small. During this time, yearly inflation has ranged between 4% and 8%, labor costs continue to increase by around 4.5% per quarter, and some businesses have reported a 40% increase in supply costs.

Higher prices drive higher business costs, making it increasingly tough to maintain profitability. But for most shareholders, investors, or senior executives, the data doesn’t matter — they’re still pushing their teams to achieve strong profit margins.

Focusing on new and innovative profitability strategies is essential to achieving your business goals. Whether finding ways to cut costs or implementing new tactics to accelerate growth, the best companies hit those profit numbers despite tough market conditions.

What are good profit margins these days?

In a world of rapid price rises, businesses have to be realistic about their profit margins. The profitability of your business was previously based on squeezing your margin, but unfortunately, there’s no more fat left to squeeze, so raising prices will only make you less competitive.

A ‘healthy’ profit margin looks different from business to business, often driven by your industry. Let’s take a look at some average 2025 net profit margin data from the NYU Stern Business School:

• Advertising — 3%
• Computer Services — 4%
• Farming/Agriculture — 5%
• Hospitality — 11%
• Information Services — 6%
• Software — 20%
• Utilities — 15%

Compare this with an average net profit margin of 8.54% across all industries, and you’ll get a sense of what a ‘good’ profit margin looks like for you.

As the cost of goods continues to rise, we predict the average profit margin will squeeze further, impacting financial performance. This will create an increased drive for operational efficiency and growth in new markets.

Other key metrics for measuring financial success

Profit margins are important, sure, but they’re not the only key metric influencing profitability. Some other metrics to assess the health of your business finances include:

• Cash flow: Businesses with a healthy cash flow prove they’re generating revenue and have demand for products and services. If cash flow is low, you might need to focus on driving sales before focusing on profit optimization.
• Operating expense ratio: OER compares your expenses relative to revenue. Most businesses aim for a 60-80% OER, so if you’re above this, consider becoming leaner and reducing costs. If you’re below or within this range, you’re doing a great job of managing resources effectively to drive profitability.
• Operating/gross profit: Businesses with a good gross profit have a strong customer base and ongoing demand. If gross profit is high while net profit is low, this may signal excessive operational costs or suboptimal pricing, especially if taxes or VAT are distorting the bottom line.

Remember, while profitability is a financial metric, non-financial metrics also pinpoint issues that may influence your profitability. Let’s look at some examples:

• Customer loyalty: Metrics such as customer retention rate, repeat purchase rate, and customer lifetime value (CLV) provide insight into your existing customers’ stickiness, allowing you to project better cash flow and revenue.
• Customer satisfaction: Similarly, metrics such as Net Promoter Score (NPS) deliver insights into how your customers feel about you and your products. If sentiment is low, you’re walking on uncertain foundations that could undermine profitability.
• Staff turnover: The average cost of hiring rose to $4,700 in 2023, up 14% from 2019. Staff turnover is a big indicator of operational expense, so the lower your turnover, the less you’ll have to shell out on recruitment fees.

Challenges to increasing profitability

Even with the right metrics, best customers, and high gross profit margins, increasing profitability is no easy task. This is because the global economic market is still so uncertain, with positive forecasts for growth (3.3% in 2025), offset by lingering inflation rates of 4.2%.

Let’s explore the leading profitability obstacles every business is facing in 2025 and why overcoming them requires intentional, out-of-the-box strategies.

Rising operational costs

As we’ve already seen, rising prices are putting pressure on operational costs, and that’s only set to continue into 2025. Increases in supply chain, raw materials, and recruitment costs aside, as inflation rises, employees demand higher salaries to maintain their quality of life.

Keeping rising costs under control requires creative solutions, with many businesses completing cost audits to identify costs that can be stripped out of their operations. Alongside this, businesses are also looking at ways to reallocate resources, develop partnerships, and outsource to reduce costs further.

Increasing market competition and pricing pressures

Rising prices lead to greater competition for new customers, with everyone fighting harder than ever to increase their market share. While cost is a big driver, companies are looking at other schemes such as referrals, partnerships, and cross-selling to maximize their customer value rather than spending big on new acquisitions.

Inefficient resource allocation

The old saying ‘work smarter, not harder’ has never been truer for modern businesses as they look for ways to do more with their limited resources. Mismanaged resources, such as time, money, or labor, lead to operating cost inefficiency. You’ll need to address each of them to stay profitable.

Many businesses are working to overcome common pitfalls such as overstaffing, unnecessary governance, and manual processes to optimize the resources they need to deliver their business operations.

Talent retention and labor costs

As mentioned, hiring and onboarding costs drain company finances, and recruitment costs only increase in line with inflation.

Investing in employee engagement, fair compensation, and continual professional development for staff is far more cost-effective than costly re-recruitment and onboarding, reducing expenses and driving increased profitability.

5 strategies for increasing gross profit

While profitability is difficult to achieve, it’s not impossible in 2025. Often, it’s about stripping things back to basics to uncover opportunities to reduce costs or drive additional revenue while being disciplined about the spending choices made across your businesses. Here are some practical tips to improve your bottom line.

1. Optimize capital allocation

A clear strategy for when, where, and why you spend money is fundamental to driving profitability. While all businesses must evolve, not every project or initiative is essential, meaning sometimes it’s better to say no.

Get around this by establishing a robust process around business cases, investment appraisals, and benefits tracking for new projects. Every project should drive a clear benefit (ideally financial!) that nudges the business toward a high-profit position.

For initiatives already underway, project managers and sponsors must be disciplined with their project cost management, sticking to their forecasts to ensure a positive ROI.

2. Leverage data for better decision-making

We’ve never had more data at our fingertips, so if you want to drive profitability, you must learn to use it. Data analytics can identify patterns, root out inefficiencies, and uncover new product opportunities — which are all essential for driving growth.

For example, you can use data analytics tools over the top of your financial statements to identify patterns of costs throughout the year or by department, uncovering the root cause of unnecessary spending.

Given labor costs are often an organization’s largest expense, tools like Toggl Track provide real insight into what your team is working on and how to improve their productivity.

Once your team uses timesheets, our newly revamped Reports tab is where you can go to dive deeper into your labor costs, identifying trends and opportunities to improve productivity.

Here’s a brief look at how we do it:

3. Streamline operations and reduce inefficiencies

Rooting out business inefficiency is another way to stifle costs and optimize resources. Reviewing operational processes using Lean Six Sigma, Systems Thinking, or Value Stream Mapping is a great way to do this — each highlighting bottlenecks, unnecessary touchpoints, and opportunities for automation and simplification.

Alongside this, optimizing team structures by reviewing spans of control, hierarchical or matrix structures, or implementing a renewed RACI chart boosts efficiencies and drives productivity.

How does this look in practice? If you completed a Lean Six Sigma assessment of a customer service process and identified some process steps that could be automated by your CRM system, you could reduce headcount (and cost) within the department.

4. Invest in employee training and engagement

Employee development is beneficial for morale and a great way to improve productivity. This sort of development is especially important in startups and small businesses, where teams often have to wear many hats without the right training to do those roles properly.

Upskilling also boosts satisfaction and reduces turnover, which, as we’ve seen, is a great way to avoid costly recruitment fees.

5. Enhance customer value through pricing and bundling

Businesses are always looking for new and innovative ways to increase revenue with pricing strategies that grow the value per customer.

A lot of this is underpinned by good market research, introducing new products through upselling and cross-selling, or merging existing products into larger bundles.

Common bundle models include BOGOF, buy-more-pay-less, or locking popular products into a ‘bundle-only’ sales model. Strike the right balance to ensure the bundle is perceived as a ‘better price’ by the customer and deliver that all-important increase in profitability.

The evolving role of technology in profitability management

Technology and data play a big role in driving profitability. Whether optimizing costs or finding ways to boost sales and revenue, several great tools on the market help CROs (and their colleagues) boost profitability.

Let’s explore some key ways technology helps teams boost profit and productivity.

⚡ Automation

Automation reduces repetitive, admin-heavy actions that are a time-suck for your employees. Most modern software tools include elements of automation, so this should be standard across all of your business functions. Examples include:

• Websites that take customer inquiries and automatically populate your CRM
• Sales tools that automatically engage with prospects based on their actions
• ERP systems that convert orders into dispatched deliveries
• Accounting systems that automate invoice generation and inventory tracking
• Customer service tools that answer frequently asked questions without human support

New to automation? It’s usually best to start small with automation so your business processes work as expected. From there, you can scale up to maximize the effectiveness and ROI of your technology investment.

📈 Financial forecasting and analysis

Many finance and budget management tools include complex algorithms to plan and predict the world ahead of you. Specifically, many budget tools automatically populate your strategic plan by combining previous spending data and future external market trends.

With the rise of artificial intelligence, these tools are becoming increasingly sophisticated. They predict risk events and issues before they occur and offer recommendations on how to optimize costs.

⏱️ Time and resource management

Time tracking and resource management tools keep a watchful eye over workforce efficiency, identifying resourcing bottlenecks and opportunities for optimization.

We frequently see this with our customers at Toggl Track, where accurate time data helps teams drive actionable insights that uncover inefficiencies, redistribute workloads effectively, and enable them to make more informed financial decisions.

Want to learn more? Here’s how Talk Shop Media used our Toggl Track profitability report to improve the agency’s productivity.

🦿 Digital optimization

When it comes to driving digital efficiency, there is a whole host of tools focused on improving your website conversion. Whether A/B testing, click rate optimization, website heatmaps, or live chat support, tools that optimize your digital experience are worth their weight in gold.

Simple adjustments to your website can skyrocket your revenue and make big strides in your profitability with minimal effort.

Focus on what matters

In a world where costs are rising and competition is increasingly fierce, driving profitability is challenging for even the most talented CROs.

While many businesses focus on simply cutting costs, you must also find ways to improve project profitability, maximize customer value, and deploy resources more effectively.

Accurate time tracking is the key to profitability, enabling you to lift the lid on inefficiencies, resource optimization, and billing rates to improve your bottom line.

Why not sign up for a free Toggl Track account to test our timesheet, analytics, and profitability insight features? Better yet, if you’re a team of 20+, you can schedule a demo with our team to get personalized advice on how to meet your profitability objectives.