I see you dithering there. If you feel the absolute necessity to dither, chances are you shouldn't. Dithering is for when you simply cannot add another colour to your palette.
Since you seem to want smoother transitions between colours, I added more colours rather than dithering.
While I was at it I changed a bunch of colours (most noticeably the skin colour) to demonstrate what changes to colour alone can generate.
Combined with the extra colours I had at my disposal I was able to make the contrast between colours less to give the image a smoother feel. Having less contrast meant I could put more dark blue on the shirt and tie to give the coat and them some depth.
I may have also changed some of the outlines (and by 'may have', I mean I did).
Around the head there is a big difference in the lines, but his shoes and hands only have minor alterations just to show that small changes in outline can make a big difference in perception.
My newer edit | Older editYou shouldn't just take my edit and work with it though. You should try making changes to your own sprite and seeing how they affect the look of it. You can use some of the techniques/guidelines I've posted, but the best way to do any art is to try out things for yourself and develop your own style.
And also tonnes and tonnes of practice. Never underestimate the power of practice. [/cliche]