7 Ways to Grow Your Business and Profitability – Part 2
In part 1 of 7 Ways to Grow Your Business and Profitability, I covered the first 3 ways:
No. 1: Build customer retention
No. 2: Generate more leads
No. 3: Increase conversion rate
I hope that you have taken some time to review your business to see how the above areas could assist you.
Now, on to the next four…
No. 4: Increase transaction value
“… would you like fries with that?” McDonalds have the upsell nailed.
You could try to upsell additional products or services that the client needs – but don’t push too hard. Remember to take the time to understand a client’s need, not just adding on a useless item for the sake of it. We’ve all seen those late-night tv sales ads saying ‘but wait … you also get a set of steak knives!”. Instead, look for other things that could be done to improve or add-on to the project that adds value to the customer and your bottom line. Don’t be afraid to recommend additional services! Remember, you are an expert in your area, and the customer may appreciate recommendations that will add value or improve the project that they hadn’t considered. It also shows them that you know what you are doing.
No. 5: Increase transaction frequency
Sales comprise of price multiplied by unit volume.
Increasing transaction frequency or volume to an established trade customer could be as simple as creating opportunities for regular contact. For hospitality, it can be as simple as consistency in customer experience. For long-term sales (like a car or a major appliance), a reminder in a few years' time may get customers thinking about replacing or upgrading.
To do this effectively you need to ensure you have a system that captures clients’ information, last sale and when you should follow them up.
No. 6: Reduce cost of sales
The cost of sales could include labour, materials and contractors. When was the last time you discussed pricing with your suppliers? Are you taking advantage of rebates, bulk discounts or sale items?
Have a look at all the stages and items that go into delivering a product to a customer and determine:
- Can it be done more efficiently?
- Are you the best person to deliver or could it be outsourced?
- Are you taking advantage of supplier offers (e.g. delivery)?
- Are your contractors delivering value?
Complete the process with your team, working together on your business at the start of every week. Your aim is to reduce cost of sales through continuous improvement – striving to save on waste. Waste will encompass anything from time to materials.
Warning: Do not reduce the cost of sales by providing less! This may lift short-term gain, though often to the detriment of your customer lifetime value.
No. 7: Reduce overheads
The last area to look at (after you’ve systematically worked through the first six) is the operational costs of the business.
In looking to improve profitability, I always leave this to the last as the three largest expenses for any business are the most difficult or disruptive to change.
The three largest overheads for business typically are:
- Wages; moving on a staff member can be very disruptive to the business and result in concern with other staff members of job security.
- Rent; relocation can be expensive, is time-consuming and sometimes you are locked into leases.
- Motor vehicles; the easier of the three but you need to make sure that it is excess to your requirements before disposing of a vehicle.
Other ‘small’ expenses shouldn’t be ignored either (expenses like the subscriptions you thought would be handy but are not used) – small amounts add up. In January this year, I went through every business expense that I had and asked: “Is it still needed, does it add value or is there a better option? I saved a lot by cutting a bunch of small, seemingly insignificant, expenses!
Over to you
Your next steps are critical; if you do nothing, retreat, or take normal amounts of action you and your business will be challenged!
If you enjoy business, plan to expend massive amounts of energy to deliver action.
After all, sustaining and growing a business is a challenge!