You can’t stay in business for long unless you’re making a healthy profit.
As an entrepreneur of course you want to pursue your dream and passion; but at the end of the day you’ve got to be making enough money to be paying all the bills ..... And let's not forget paying yourself a reasonable wage to make all the hard work and long hours worthwhile. At its simplest, in order to increase profit you need to be able to either increase your revenue, or reduce your costs and expenses. Let’s explore these broad strategies a bit further and turn them into seven practical tips …..
- Increase sales by increasing your customer base. This could be done through local promotions, retail displays, targeted email marketing campaigns, or online Google advertising. Encouraging referrals from satisfied customers – and using testimonials from satisfied customers in your marketing. Ensure staff have been properly trained and resourced so that when your promotions succeed in generating new enquiries, these will be converted to sales. When you focus upon expanding your customer base, take care that this is not achieved at the expense of compromising service quality to existing customers – repeat business from loyal customers is the lifeblood of any successful business. Also take care that you're not spending so much on advertising and marketing that it outweighs what you gain through acquiring new customers.
- Expand your line of products or services. In other words, you will be able to offer a wider range of solutions to existing customers. Increasing the opportunity for cross-selling and leveraging the relationships and goodwill you have established with your existing customer base to sell more items to them. Are there existing product lines that could be expanded with “accessories” for example? Selling belts and not just trousers, or selling pet food and not just pets.
- Reduce operating costs and expenses. Sometimes, this can be achieved through negotiating more effectively with existing suppliers – or investigating alternative suppliers that can offer you a better deal. It could be that if you have been with a particular supplier for a prolonged period of time that they may have become complacent in their pricing with you. You might explore with them whether you could obtain a better unit rate through increasing the volume of your order, or changing required delivery times for example. .Even simple savings through introducing energy efficiency initiatives in your business can contribute to reductions in power bills. And finally – ask your accountant if there is anything you can do to ensure you are claiming all possible tax deductions
- Consider increasing your prices. This can be a scary thought ….. Obviously care must be taken that you don’t price yourself out of the market – and you need to keep an eye on your competition. However if you are offering a strong value proposition to your customers, in terms of either a clear advantage in quality, delivery time, or service and support for example – then many customers are prepared to pay more.
- Prune your offerings – so you can focus your efforts on the more profitable items. It may well be that some of the products or services are not providing a reasonable margin for you – and its time to re-direct your energy and resources towards the items that are more important to the success of the business.
- Get better at credit management. In other words, be active in chasing up debts so that people or businesses who owe you money learn that they need to pay you on time. Setting tighter credit terms and shorter payment terms will help to improve your cash flow. Have a clear credit policy in place so that you automatically turn off supply to debtors once their debts go beyond a reasonable trigger-point. There are too many examples in the construction industry for example, where trade sub-contractors have ended up being owed tens of thousands of dollars because builders went out of business. They continued to offer generous credit terms and continued working in the vain hope they would eventually get paid by the builder. There were instances where these sub-contractors were lucky to be paid one in ten dollars by Receivers.
- Ensure your staff are productive. If your business employs staff, then wages are a significant expense. So take the time to hire the best people up-front; they will subsequently require less direction and supervision from you. And when you have quality staff that you treat well and actually engage them in your business – then they will contribute ideas and suggestions that will help to improve efficiency and enhance service delivery to your customers. Ensuring your staff are fairly rewarded for good work will reduce staff turnover and avoid expenses associated with hiring and training new staff. But even when you have good people working for you, there will still be instances where it will be more cost-efficient to outsource the performance of certain tasks rather than performing them “in-house”. Book-keeping might be one example of such a task within a small business - outsourcing it can allow you and your team to really focus on what you all do best.
Further posts & articles on this topic -
Small business and how to boost sales ;
Why small businesses fail to grow : the E-myth ;
The entrepreneur and the inner game of business
Author
Brian Carroll is the editor of Australia Small Business. He is the founder of Melbourne based Performance Development, a corporate training & HR consulting business that has been established for more than 25 years.
