Owning a business is not for the faint of heart. When you own your own business, you must constantly be looking at your bottom line. It can, at times, be a financial balancing act between profit and loss. All businesses, from home security companies to web design companies and even places like law firms, have to stay profitable to stay operational. Most businesses don’t just want to survive. They want to thrive. How can any business, regardless of its sector, increase profitability? Like many things in life, it takes hard work; these 13 tips can help.
More profit through increased prices
Raising the cost at which you sell your product is the most obvious way to increase your profits. As a business owner who is trying to stay competitive with their price point, you may be hesitant to do this. However, it doesn’t have to be a significant increase to make a difference. If you raise prices by around three percent, it won’t raise the price too much, allowing you to increase your profitability and stay competitive.
How to raise prices without losing customers?
Every business reaches a point when it’s impossible to increase profitability without raising prices. Even if you have a profitable business, not raising your prices means you are leaving money on the table.
Here is how to raise your prices for more profit:
When you need to raise your prices, show your customers the reasons. Explain the increasing cost of doing business. Customers are much more accepting a price increase when you show evidence that labor and materials are also more expensive. Also, highlight new features that you have added to your offerings.
If you are in the consumer packaged goods business, you can reduce the size to increase your prices. Sometimes, this is referred to as a hidden price increase, but it will help your profitability. Reducing sizes is a clever way to cut costs without raising prices, increasing your overall profitability. Companies often blame size decrease on waste. They argue that smaller packaging eliminates or reduces waste, getting the customer on their side.
You can offer price tiers to make your business more profitable. Profit-centered businesses offer varying levels of services, ranging from basic to premium. By moving to tiers, you allow your customers to self-select on pricing. The reduced service burden allows your business to reduce operating expenses, therefore, increasing your profit margin.
Increase prices at least once a year. When you make price increases a habit, your customers won’t be surprised when it happens. Regular price increases should be an ingrained part of your business. Include it in your overall business strategy.
Every year, you should assess costs, prices, and profit margins. This process is a good business practice to help you achieve regular price increases.
Some customers cost more money to serve than others. This is especially true in service businesses. So create an internal system to evaluate the cost of service and increase your prices to maintain profitability.
Companies must be thoughtful about how they share news about a price increase with clients. The sensitivity of conversations about price requires tact. Depending on the price point, an email or letter may suffice. However, if you are working with a dealer network, person-to-person communication is the better approach. Customers will be more understanding of price increases when they feel you treat them with respect.
Dynamic pricing is the best way to increase prices in some industries. Pricing is driven by algorithms in many sectors of our economy: airline, hotel, and transportation pricing change in real-time. Machine learning algorithms control price changes based on countless variables. For example, the price is often adjusted based on the number of available service providers and customer demand. Dynamic price changes incentivize to buy at certain times.
Regular price increases will condition clients to expect it. It’s critical to carefully communicate changes in pricing. The adequate notice allows customers to adjust their systems and budgets. A price increase is an easier sell when the customers are happy with your service. Increasing your prices when customer satisfaction is low could result in a loss of market share.
Decrease costs and increase profits
Every business, large and small, should think about decreasing costs to increase profits. You should always think about lowering costs in good times and in bad. It’s much better to lower costs because you want to, not because you have to.
The most successful companies find ways to reduce costs without lowering the quality of the product or service they offer. It is self-defeating to reduce costs while offering a lower quality product. If you want customers to continue to buy from you, you have to find a way to reduce costs while maintaining outstanding service.
It’s best to start cutting expenses that do not produce value for the customer—cutting costs in this way results in a service that more closely matches customer expectations while also lowering costs.
Research supply chains in your market area. Make sure you are receiving the highest quality goods at the lowest possible cost. Stay abreast of the changes that may happen in the supply arena in your market area. That way, you can always renegotiate the deals you have with your own suppliers. If possible, decrease your supply cost. Keeping costs down is just as important as keeping prices up.
Ways to decrease costs for higher profits:
- Utilize free resources to achieve higher profits. For example, you could use open-source software in your business to cut down expenses.
- Lower your insurance expenses to increase profits. Every year, reevaluate insurance costs. Get competing proposals before you sign another insurance contract. The comfortable way to handle insurance is to stick with your current insurance provider, but if you are serious about cutting costs, you need to look for better deals all the time.
- Save on office space. Can you do with a smaller office? Perhaps you could move your company to a less expensive property.
Make your business more profitable with effective time management
One way to increase profits is to control how much time is spent on each business activity. Effective time management means your team will complete more tasks in less time, making your company more profitable. Setting time constraints on your staff allows your team to work more efficiently.
Cut the deadweight and watch your profit grow
It’s important to make sure that every part of your business is functioning optimally. If you have underperforming staff, milking the clock, or otherwise being underproductive, set a limit of time in which they have to turn their performance around. If they fail to perform properly within their given time, terminate them. Employing people who aren’t embracing your company vision and working hard at achieving company goals are costing you money.
Increase Leads
All businesses need to generate leads in order to be profitable. If you’ve ever been in real estate, owned a law firm, or done any type of direct sales, you know lead generation is your business’s lifeblood. Increasing your leads will generate more customers and ultimately increase your profit margins. The best lead generators have a business plan and a solid network to help implement their plan. In today’s market, networking via social sites like Linkedin, Facebook, Twitter, Instagram, GooglePlus, and similar sites can help get your business in front of more eyes. Optimize your use of these sites, as they each have their own ways to promote ads internally, which ushers in more leads for your business.
Improve Your Salesmanship
Make sure you are comfortable pitching your business to people. If you don’t have the strongest sales personality it may behoove you to go to a sales seminar. Make sure your sales team is comfortable in their roles. It’s been estimated that a well-informed sales team can increase sales by 46% or more. Equip yourself, and equip your people to excel in their careers.
Presentation is Key
Make sure that you are presenting the strongest portion of your business as the focal selling point. For instance, if you are one of the many home security companies in the area, but you are the only one offering live monitoring services, let that be your selling point. It’s likely that your customers already associate you with something; find out what that is and capitalize on it. Make that the focus of all your presentations, and allow it to draw in new customers.
Be a Cut Above
You may do something that someone else does in your area. It’s likely that your business is not the only one of its kind. There is likely something you do that is better than your competition. Make sure that you point out your own value. Holding yourself and your business to a higher standard than your competitors will lead to repeat business every time.
Offer the Upsell
Offer special deals and promotions to entice your customers to buy more merchandise. Every time a customer reaches a point of sale, they should be offered an upsell. Upselling is for any customer service field. Even a law firm can offer additional services for a lesser fee. More services rendered equals more money for your business,
Focus on Repeat Business
Run sales and deals on a periodic schedule to draw your customers back sooner rather than later. The more frequently your customers return, the more money they will spend with you. This starts by keeping your name in the forefront of their mind. Make sure you have a solid marketing plan in place for this. Remember that it only takes a five percent increase in repeat business to increase your profits by up to 75%.
Customer Follow-up
Making sure that you retain the customers you worked so hard to acquire is a big part of keeping your business profitable. To do this there are a number of follow-up platforms that you can use to make sure your customers are still happy with your services. The number one reason customers leave a business is dissatisfaction, so making sure your customers are satisfied is the best way to retain them.
Acquire Funds More Quickly
By processing payments daily instead of once or twice a week, you will maintain a fuller bottom line. It will also help with customer retention, as many people rely on their online banking platforms to keep their balances. If your business processes payments quickly, they don’t have to keep a mental or physical record of the amount they spent with you as it will draft from their accounts immediately.
Send Debits Slower
If you have to process refunds or other monies that will leave your account, process them as slow as possible. Keeping monies in your business account gives it a “healthier” look to possible investors, partners, and bankers. This “healthy” bank status could give your business the edge it needs to acquire a loan or gain an investor in the future.
Create No-Cost/ Low-Cost Marketing Plan
Despite the saying that nothing in life is free, there are some things you can do, at no cost to your business, to promote it. Social media is a great example of this. While there is a paid option to promote your business via social media, you don’t have to. Organic shares and likes are all drawing people toward your business. There are other tools at your disposal, so pick a few, and get started today. Inaction is the only thing that can stifle your business momentum.
No matter your business arena, it’s important to have a solid business plan in order to succeed. The main thing to remember is to stay adaptable. Most plans need a certain degree of adaptability, but it’s important to rethink it and never give up. Perhaps after you implement these tips, you’ll see your biggest profit yet.
