5 Strategies to increase profits
There are generally five core strategies to increase profit in your small business, each having a multiplier effect. Rather than focusing on large increases in one area, look at the following areas and concentrate on small increases in each for better cumulative results.
1. Increase your leads
Try new things you may have never considered before, anything you can do to get in front of new customers is a valid tactic.
- Identify your most successful promotional tactics and repeat. Don’t worry about why they worked.
- Attend industry events and conferences to meet potential customers.
- Consult an expert to re-develop your website for new search engine optimization opportunities.
- Develop new distribution channels– think about using agents, licensing your goods, or utilizing new distributors.
- Ask current clients to provide referrals.
- Run webinars or speak at events.
2. Convert more of your leads into customers
Once you have more leads, work on increasing your conversion rate. Even converting a small percentage of more leads into customers should generate significant sales.
Measure your current conversion rate (for example number of unique users to your website divided by the number of online sales) and then consider the following:
- Organize training for staff on selling techniques and closing methods. Provide staff with incentives or bonuses for higher conversion rates.
- Run demonstrations for potential customers to see what you have to offer and how they could benefit.
- Create whitepapers or original content that’s valuable to potential customers. Engage your audience with ideas and information that will want them to learn more and buy from your business. /li>
- You can also consider running loss leaders: products or services at below cost to convert customers across to your business and then sell to them over their lifetime value.
3. Increase the number of items you sell per customer
If you can entice your customers to buy just one more item, or hour, or extra service from your business, your sales (and your profits) will increase. Add-on selling is a classic tactic to improve your profit.
- Add impulse/lower cost products at checkout or a final sell when closing.
- Ask customers what else they would be interested in buying from you and then widen your product range to accommodate their needs
- Bundle products together.
- Offer complementary services.
- Research competitors to find new product or service opportunities.
- Add services if you sell products or add products if you sell services.
4. Increase your average sale
If you can increase the average value of each sale, you’ll directly improve your profit.
- Check that your highest margin products and services are displayed prominently on your website. They should have the most promotional budget allocated.
- Ensure all employees know to sell those products with the highest average sale price and there are incentives when they sell.
- Introduce new premium products or services that have a higher value and price point.
5. Increase net profit percentage
Net profit can be improved by looking carefully at your gross and net margins.
- Review your main suppliers and determine if you can replace with lower cost providers. Double check that any new supplier can match the quality and service you expect. Re-tender or ask suppliers to re-quote on a regular basis.
- See if you have any components or parts of your business that can be sub-contracted out to lower cost suppliers. Make sure this tactic won’t impact what your customers expect (for example locally made versus imported). But if the component is a small part of what you provide, customers may not notice or mind.
- Identify your top five overhead costs to find savings. Overheads such as power, insurance, office supplies, internet, subscriptions and communications can change year by year. Make sure you’re benefiting from any reductions.
- Evaluate employee costs if possible. Review job descriptions to find any overlap and consider making changes to staffing.
- Meet with your employees, accountant, and any other advisors to brainstorm additional tactics to increase profits.
- Ask your employees to contribute ideas to sell more and spend less.
- Monitor your main competitors to see what they are doing to increase sales, reduce costs and improve profits.
- Keep up-to-date with any of your industry trends and look to adopt any new ideas or technologies that will lower your costs and improve your profit margin.
- Review these five strategies to increase your profits at least once a year. Repeat any strategy you find to be successful.