Increasing your profits might sound like it’s an unattainable dream just out of your reach. But there are a finite number of ways that profits can be increased. Once you understand what they are, you’ll have clarity on how to best reach your goals.
There are two primary ways to increase profits:
- Raise revenue
- Lower expenses
That’s not particularly enlightening or instructional, is it? Let’s look at the four ways you can increase revenues and the four ways you can reduce expenses to get clearer on what actions we can take.
Four Ways to Increase Revenue
1. Raise prices
The easiest way to raise revenue is to simply raise prices. However, this is not foolproof and assumes you’ll be able to maintain the volume of sales you’ve achieved in the past.
This method is also limited by market demand, what your customers are willing to pay.
2. Add new customers
Adding new customers is what most entrepreneurs think about when raising revenue. Increasing your marketing or adding new marketing methods is typically the way to add new customers.
Another related option is to work hard to keep the customers you already have. You can also potentially contact the customers you lost and ask them to come back.
3. Introduce new products or services
For some companies, your products and services are changing every year. For others, not so much. To increase revenue, consider adding new products or services that will bring in an additional revenue stream that you didn’t have before.
Even if your products are changing every year, you can consider adding something completely different that your customer base would love. For example, a hair salon could add a nail desk, a clothing store could add handbags or shoes, a grocery store could add a coffee bar, a restaurant could add catering, a landscaper could add hardscaping, and so on.
The final way a business can increase revenue is to acquire another business in a merger or acquisition.
Four Ways to Reduce Expenses
1. Negotiate for a better deal with vendors
If you’ve been working with a vendor for a while, you may be able to re-negotiate your contract with them. This is especially common with telecom companies. Call you phone provider and ask them for the latest deal. They always favor new customers over long term customers, but they don’t want to lose customers either. Just calling them usually yields a better price than what you are paying now.
2. Change vendors
If a vendor has gotten too expensive, it might be time to look for a new vendor. Health care insurance seems to be in this category. Often, changing providers will lower your costs.
3. Cut headcount
If there is not enough work to support your employees or not enough cash flow to pay them, then it might be time for a layoff or restructuring. You might also consider outsourcing a function that you previously did in-house.
4. Cut the expense or reduce services
It might be your business no longer needs to spend money on an expense. Perhaps this expense has been automated. In this case, it’s an easy decision to cut the expense out entirely.
Those are the eight ways to increase profits. Which one makes the most sense in your business? Create a plan around these eight ideas to boost your profit in 2017, and let us know if we can help.
It’s the little things that add up to make an exceptional experience for your customers. Here are five “little things” you can add to your services to create an exponentially memorable connection with your customers.
Add a little extra something to the products or services you offer. It could be a piece of chocolate like Hershey’s® Kisses®. It might be a handwritten thank you note. It could be a coupon for their next visit. It could be a bottle of water.
These little additions pack a huge wallop for the customer experience. And none of them cost a lot to implement (unless you eat all the Hershey’s® candies yourself). Think of what you can add to your customer experience so that the customer sees you as generous and caring.
Many customers value their time, and adding speed to your service will be appreciated. When customers call in or email you for a service question, how fast do you respond?
Set response time goals for you and your employees to respond to customer issues and questions. You might choose one minute, four hours, or one day for response time, depending on your business. Make sure customer emails are answered first, and have someone monitoring the phone during business hours.
Track your results and reward your speediest employees.
Acknowledge and Apologize
Sometimes things go wrong, and an apology to the customer is in order. In most cases, customers simply want to be heard, so your listening skills are your best asset at that moment.
As an entrepreneur, the buck stops with you. Even though it might not have been your fault, it’s sometimes a good idea to simply apologize in the sincerest way possible. If there’s something that needs to be done to make it right, go overboard. Give the refund, take the loss, and let the customer win.
How you word things can make all the difference. Which sounds nicer?
“That item is out of stock and won’t be in for six weeks.”
“We will have that item in stock in six weeks.”
The first sentence has two negatives (out of stock and won’t), while the second sentence is positive. It avoids the negative wording.
It’s a small but powerful change in the customer experience. Think about how you can word your communications so that there are more positive words and fewer negative words when speaking with customers.
Your Full Attention
Although you want to respond to customer issues with speed as mentioned above, while you are working with the customer, take time to slow down and really engage with the person. Our world is so fast, and some companies even reward multi-tasking, but no customer appreciates interruptions when being helped.
When you are with a customer, even on a phone call, be with the customer. Avoid interruptions and distractions, and give them your full attention. It’s the most powerful thing on this list. Treat them as a real person, not just another figure, and the customer will notice.
Try one or more of these five customer service boosts to take your customer service experience to the next level.
If you have employees, you probably also have a process to help them understand how they are doing on their job performance. There’s a new trend in large companies to kill the annual performance review and replace it with continuous, instant feedback as well as a tool called an after-action review.
An after-action review (AAR) is a fantastic process to help you look back at a project or period of your business to see what, why, and how things occurred and how they can be improved for the future. Taking a profit-focused view will help you get the most out of the idea.
The AAR provides you with a bit more formal process than a passing “hmm, how did we do on that project last month?” conversation in the hall. For example, if you planned your client retention rate to be 90 percent and your rate was 85 percent, you may want to take a look at why that happened. Doing exit interviews or a survey with discontinuing clients can help to explain the five percent variation.
Continuing the example, once you have done the interviews, you may have some ideas for improvement. It might be to automate some communication, increase response time, add more time for explanations, or something else. Let’s say you got sick last year and lost some clients because your response time during that time was not good. This year, you can put a sick plan in place to call on a peer to help you out so your service does not suffer.
The AAR requires an open mind and you will need to accept responsibility. One of the key benefits of the AAR is increased accountability. The core questions to ask yourself and your team include:
- What was supposed to happen?
- What did happen?
- What worked? What should we keep doing?
- What didn’t work? What are some improvements?
- What advice would you give yourself at the beginning of the year? (Or project?)
- What personal lessons did you learn?
You can use the AAR to improve your business by using it after each large project, to measure goals, or for a specific timeframe. Look at your first quarter performance this year. Are you on track? What improvements do you need to make for next quarter that you can work on over the summer and fall? Some opportunities to use the AAR include:
- Technology changes / additions or training
- Staffing changes
- Hiring process changes
- Marketing changes / additions or training
- Operations changes / additions or training
- New service or product development / new niches
- Changes in your existing services or products
- Customer retention
- Sales cycle changes or development
- Pricing evaluations
- Client surveys / communications / service level changes
The good thing about the AAR is you can make it as formal or informal as you want. You can invite your team or do it yourself, although you’re going to need an open, unbiased mind. Try it in your business, and let us know if we can help.
Online marketing is a large component of marketing for many small businesses. There are many aspects to online marketing that you’ll want to consider for your business. Here are just five for your consideration.
Content marketing is huge, and it consists of generating articles, blog posts, social media updates, white papers, videos, and other educational materials about your company’s products and services. Content marketing provides your prospects with something to read, watch, or learn from.
You can offer your content via your website, social media pages, a special landing page, in a blog, in the description portion of your profiles, via paid ads, or almost anywhere online. Your content should promote your brand as well as show your prospect how to use your product or service.
Video has become incredibly important. It’s no longer enough to generate text. Graphics are better than text, but video trumps them all when it comes to effectiveness, higher search rankings, engagement, and sales conversions.
The good news is you don’t have to hire an expensive video team anymore. A good video camera is less than $500, and you can also use your smartphone for some very decent footage.
It’s no longer enough to simply have a website. Being listed in online directories will help your business expand its visibility. Some common directories for small business include:
- Angie’s List
- Better Business Bureau
- Yellow Pages (online version)
- Your local Chamber of Commerce
- Google for Business (Google Places)
Some of these directories work best if you ask customers to post reviews. Be sure to also check out your industry-specific directories.
Including social media in your digital marketing is a no-brainer today. Graphic and video posts are far more effective than text posts, so it’s important to make this content switch if you haven’t already.
If you’ve focused on the “big 3” platforms – LinkedIn, Twitter, and Facebook – it might be time to try some new ones. Pinterest and Instagram lend themselves to graphic representation of your product. Google Plus is often overlooked but can help search engine rankings. And YouTube is a must because of the importance of video.
Digital public relations has been around for a while as well. If you don’t already have a Press page on your website, consider this addition. It can list contact information for reporters as well as a list of articles that your product, company, or employees have been featured in. You can also post press releases to this page.
Distributing press releases is less expensive than ever with options such as PRWeb and PRNewswire.
Make sure your digital marketing campaign has all the components above and that you have updated your content for these latest trends. Having an up-to-date digital campaign will help you generate more revenue and grow your business.