People often think that increasing profits is hard, but a few minor adjustments can make all the difference. Anthony Fleming has some tips.
Create a Sales Funnel
A funnel is not something that is just used in the kitchen! A sales funnel describes the process of the customer journey. The start of the funnel is normally quite broad and then gets thinner and thinner as it goes up. Prices at the beginning of the customer journey are normally quite reasonable, to get people into the funnel, and experiencing your product/service. The higher the funnel goes, the more the prices increase, and the fewer people you have buying. Let’s say for example that you sold quality wall prints. The initial customers might buy something on reasonably priced paper. Their next purchase might be a framed print which costs 20 per cent more. Once they have the framed print, they might graduate to a canvas print which costs 100 per cent more. The great thing about sales funnels is that once people make the initial purchase, you have the opportunity to create the “know, like and trust” factor, thus making it easier for them to make another purchase from you. The easiest way to sell is to sell to your existing customers, so cultivating the right relationships is important.
Check Your Pricing Strategy
When people start in business, they sometimes price too low through fear that people will not buy their services, but you absolutely must check your pricing strategy. A few adjustments can make all the difference. People often make assumptions about pricing and assume that people will not be able to afford it if they price on the higher end of the scale, but the best way to know what you can comfortably sell at is to test your pricing strategy. What are your competitors selling at? What do your existing customers think that your product/service is worth? The way that you can ask your existing customers is to first disarm them by letting them know that you won’t be putting their pricing up immediately, and then ask them what they value your product/service to be. A contact of mine did this recently, and as a result, they put their prices up by 50 per cent, which over time will result in a 100 per cent profit increase.
Lower Your Operational Costs
People often associate profit increases with bringing in more money, but reducing your costs can help to increase your profits substantially. When did you last do a spending audit? It is important to audit your costs periodically and cut anything that is not in use. Sometimes it means being ruthless. Do you have one too many rental cars in your firm that no one is using? If so, get rid of it. Do you really need a franking machine when people are open to receiving correspondence via email? Get rid of it. Tough times require tough decisions, and if you are serious about increasing your profits, some things may have to go.
Create Powerful Business Relationships
Business owners can sometimes spend a great deal of time building their own customer base, but a really easy way to increase your profits is to go where there are already buying customers. For example, a business consultant with a high-class reputation wanted to attract new customers. They approached an online business networking group that had over 20,000 members. They gave valuable tips to the group, and as a result, they had an influx of inquiries which resulted into sales. It’s not always about re-inventing the wheel, it’s about finding the right wheel to tap into.
Invest in Learning
As the business owner, the success or failure of your business ultimately lies with you. That’s why it’s important to be constantly growing and learning. Trends are changing at an astounding rate, and you need to keep on top of those trends. Blockbuster video was a video hire company that loaned videos to their customers. But one of their biggest mistakes was that they failed to evolve. Internet streaming made it so much easier to access videos on demand, so the need for a service like Blockbuster diminished. They failed to keep an eye on the trends, and they paid a very hefty price. Always be up-skilling. It will keep your business alive.
Anthony Fleming is a business coach dedicated to helping businesses grow.