Do you want to grow your business over the coming year? Do you need a strategy to increase the money you make because your profits have plateaued? Are you trying to turn a break-even or loss-making business into a profitable one? Here are five effective tips to increase profits in your business.
Understand Your Profit Margins
You can’t increase the profit you make if you don’t know your profit margins. In addition, it is important to understand all the profit margins in your business, not just the overall figure. This means individual profit margins for different products or services. It also means profit margins for individual customers who may be on different deals.
When you have these figures, you can make decisions. For example, are you spending enough time and effort on the products, services, or customers that are making you the most money? What can you do with products or services that are not making money or that are not making enough?
Drop Low-Value Customers
Following on from the last point, you should look very critically at customers that are low profit or loss-making. Explore ways of improving the profit margins you make with these customers by changing the deal they have, increasing the prices they pay, upselling, or cross-selling.
Taking this sort of action will not always be possible, though. In this situation, you should always be prepared to drop customers that are loss-making or low profit. Doing this means you can allocate more of your time and resources to customers that are profitable.
Review and Increase Your Prices
When was the last time you increased the prices of your products or services? Is a price increase justified because of increased costs or changing market conditions? Does the value of your service justify an increase in price, particularly if you have improved the service since your last price increase? If any of these apply, you should look at increasing your prices.
You can do this gradually as customer contracts come up for renewal, or you can do it in a single initiative.
This method of increasing profits in your business is about increasing your overall profit margin. Specifically, it involves decreasing costs by automating processes.
One example is to make buying from you easier through automation. This could mean implementing and optimising a checkout feature on your website.
Another example is to implement accounting software to automate repetitive accounting tasks like invoicing, or CRM software to automate marketing and customer service processes.
Focus Your Marketing on Conversions
The final tip is about your objectives with marketing and advertising initiatives. Small businesses often look at marketing campaigns in terms of cost or in relation to how many people will see the ad or message. These are, of course, important, but they are not the most important thing you should consider when advertising and marketing.
The most important thing is conversions:
- How many people become leads following a marketing spend, i.e. how many people give you their contact details, phone your business to make an enquiry, or visit your location; and then,
- How many of those people make a purchase or agree to a deal.
When you focus on these measurements, you will get much better results.
Please contact a member of the Gilroy Gannon team today to get more help and advice with your business.