What do business owners usually do when they plan to increase their profits? They look at ways to cut operating costs. That’s their first instinct and it makes perfect sense on paper!
But the reality is that costs can only be reduced minimally before the quality of your offering starts to suffer. Value is reduced and then who loses out? Your poor old customer, that’s who.
On the other side of the coin, when value for the customer is increased, business costs tend to go up. Better products and services don’t come cheap.
Not to worry, though. There are other ways – smarter, better ways, in our opinion – to increase profits. You may not have thought of them before because they’re very close to home.
Try these 2 on for size:
INCREASE YOUR AVERAGE SALE
“Would you like fries with that?” 6 words, each of them business gold. Upselling has everything to do with McDonald’s success and it can work for other businesses too. This accounts for a significant portion of their turnover and profits.
The strategy used by many business owners to increase turnover is to attract more customers. This is all well and good, but it takes time and money.
Often overlooked is the opportunity to increase turnover by upselling to the customers you already have.
Why? Because it is 6 times more expensive to get a new customer over the line than to upsell to an existing one.
Questions you should ask yourself include:
- What is my average sale? If you don’t know, find out.
- Is there scope to bundle my products and services in a bid to increase this sale?
- Could I proactively tell my customers about my special offers before they ask?
- Are my customers aware of all the products and services I offer? They may not be. Tell them what else you can do for them.
FOCUS ON HIGHER-VALUE CUSTOMERS
Many businesses make the mistake of letting just anyone become a customer. It seems rude to turn away perfectly good business, right? Not necessarily.
Every business owner knows that some clients are more trouble than they’re worth.
- There are those who want everything done yesterday.
- There are those who only pay you months later (after much cajoling).
- And then there are those who are just plain difficult to deal with.
Profits suffer because of these people and they are much more labour-intensive to service.
There is a better way.
You can start by classifying all your customers and clients according to the value they bring your business. The customers who fit into the categories above should be classified ‘D’ and either re-educated or let go.
Re-education essentially means letting them know (in the nicest possible way) that you are finding it tough to look after them as well as you would like. Tell them what they can do to meet you halfway so that your business relationship to become a ‘win/win’.
As for the ones you decide to let, draft a ‘Dear John’ communique where you politely advise them that perhaps you are not the best fit to work together. Say that you wish them well, but can no longer service them.
Then you have the brain space to concentrate on your star-performing (A++) customers!
Take extra-special care of these winners. Stay in regular contact and make them regular offers. That way, you can deepen your relationship, upsell to them where appropriate and ask for referrals. Provide a premium service and look at all of the opportunities there will be for them to help increase your turnover.
The best thing about this is that they can refer friends and colleagues who are just like them! A++ clients of your dreams.
As you can see, raising profits is not always about slashing overheads or attracting more customers at any cost. Sometimes it’s about making the most of what you have.