One of the most common questions I get asked by business owners is how they can improve their profits. This is understandable as profit is the one reason anyone is in business. My answer is simple.
Increasing profit can only be achieved by working on and improving the variables that contribute toward the profitability of your business.
It’s wise to view your business in terms of five separate and distinct areas. You need to break your business down into a simple schematic. It doesn’t matter what size your business is or what it does, the same schematic still applies.
We call it the Business Chassis. When you truly understand how a business works, you’ll realise that profit is the result of many variables and it can’t be directly altered in isolation.
Conventional businesses look at sales from the standpoint of three variables namely sales, expenses and profits defined by the formula:
Sales – Expenses = Profits.
In this narrow approach, each variable depends on the other – forcing businesses to look either at increasing sales or decreasing expenses in order to influence margin, and ultimately profitability.
There are only five ways to truly grow your business: Increasing the number of leads, increasing conversion rates, increasing average transaction size per customer, increasing the number of transactions per customer and increasing profit margins. If you increase all of those factors by just 10%, you can give your bottom-line a massive boost.
I want to share five simple, proven (and low-cost) strategies you can use immediately to start feeding more profit to your bottom line. Most of them involve resources you probably already have in your business or little ’tweaks’ to strategies you may already be using.
Increase your margins by taking a price increase on your best-selling product or product range. If you don’t know what your strongest product is, now is the time to find out
To increase your average rand value sale, create a guarantee, especially if none of your competitors have one. Guarantees are great ways to covert customers and establish long-term relationships, especially in categories that are hard to ‘guarantee’ or industries that don’t offer any. Communicate the guarantee to your target market.
This will boost referrals among current clients and increase qualified leads.
To increase your average number of transactions, create loyalty and referral programmes. While a lot of companies use this strategy, many don’t use it correctly. To get the most out of a reward programme, target it at your highest-yield customers, those loyal clients who don’t haggle on price.
Done right, you can create both a rewards programme and a referral programme that is profitable rather than simply defaulting to discounts or giveaways.
To increase your conversion rate, create sales scripts for your sales people and train them. Sales scripts help to frame your sales process. The sales script should uniformly help initiate and build rapport which leads to higher sales.
To increase your number of leads, test
and measure low-cost ways first. Then move to paid advertising. Lead generation is costly so start with low-cost ways to track for results before you start spending thousands on an advertising campaign.
Look for incremental increases to your bottom line. A 10% increase in each of these areas will improve your profits as long as your costs are in check.
Profit-building strategies focus your mind on what needs to be done to maximise your profits. By throwing the spotlight on these areas you could learn new things about your business.