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 the business 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 looks 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 at either increasing sales or decreasing expenses in order to influence margin and ultimatley the profitability of the business.
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 percent, 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 bestselling 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 customer relationships. This is especially true in categories where guarantees are hard to “guarantee” or in industries that don’t offer any. Communicate the guarantee to your target market. This will boost the number of referrals among current clients and increase the number of qualified leads.
To increase your average number of transactions, create loyalty and referral programs. While a lot of companies use this strategy, many don’t use it correctly. To get the most out of a reward program, it should be targeted at your highest-yield customers, those truly loyal customers or clients who don’t haggle on price. This involves segmenting your client base. Done right, you can create both a rewards program and a referral program that is profitable versus one that simply defaults to discounts or giveaways.
To increase your conversion rate, create sales scripts for your salespeople 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 actually the most costly of the profit-boosting strategies. So start with low-cost ways you can track for results before you start spending thousands on an advertising campaign.
Remember, you are looking for incremental increases to your bottom line. A 10 percent increase in each of these areas will make a significant impact on your profits as long as you keep your costs in check.
Profit-building strategies serve a number of very important purposes in business. First, they focus your mind and attention on what needs to be done to maximise your profits. Secondly, by throwing the spotlight on these areas you could learn things about your business you never knew before.