Not Making Much Profit? Here are Seven Strategies to Focus on to Get Your Business to Make Money!
Imagine slaving away for years in your own business to find out that it is not worth anything. Regularly I meet with a business owner who asks me how much their business is worth and I have to tell them the disappointing news that their business is actually worth very little. The reason it’s not worth anything is often because it is not making a profit. While the naysayers of capitalism focus on the fact that some businesses are corrupt in making excess profits, the reality is that 60% of small businesses aren’t profitable or are only marginally profitable. Would you work in a job where you aren’t being paid or are being underpaid? I doubt it!
In order to be healthy and provide jobs for the economy, invest in their communities and support non profits with their donations, it is essential that a business makes a profit. To make this happen, businesses need customers who are willing to buy our product or service and as the customers buy our products, we turn those customer purchases into profits (after paying our expenses). If your business isn’t making the profits it needs to stay healthy, the good news is that there are focused strategies that improve our business in key areas will result in a substantial improvement in the bottom line.
Contacts, Leads and Referrals: All businesses need prospective customers, people that might be interested in our product or service. How we identify and reach these prospects is determined in our marketing plan. In fact, we will go over strategies to help you reach these prospective customers and turn them into paying customers. The key thing here is to understand that prospects are potential customers. Working in this area will increase sales and if everything else is working improve your bottom line.
Existing Customers: Unless you are just starting out all businesses have existing customers. These are the people that are currently buying your product or service. As business owners, sometimes we are so focused on getting new customers that we take our existing customers for granted. Once you have identified what market you want to play in, your existing customers in that market are key to your ongoing success and profitability.
Past Customers: Over time some of your customers decide not to buy from you. Some do die off (literally) or perhaps move away, others choose to buy from competition, perhaps are buying online, or for some reason are not buying from us. As a business owner looking for profits we need to know why these people are not buying from us if simply for the fact that we don’t want to lose any more customers. Better yet we want to transform those past customers into buying customers once again.
Conversion Rates: How many prospects can convert into customers? Online companies are great about considering their conversion rates, but how many brick and mortar business owners look at how many customers are coming through their doors and leave without purchasing? What can we do to improve those rates? What can we do to increase the number of times that our customers buy from us in a given year? There are a number of strategies you can use to improve conversion rates.
Average Sales: What can you do to increase your average sale? You have the customers buying from your business (which is the hard part); now think about how you can sell them more of what they want. This increase in average sale can make significant differences to your business and you will have concrete ways and ideas that you can use to increase average sales.
Margins: Gross margin is the amount of money that you have left after paying for the cost of the products or services sold. By dividing this number by your total revenue, you get your gross margin percentage (also called gross profit percentage). This is important because this is the profit you have made before your fixed expenses or those ones you must pay to run the business. Think about areas where you can increase your margins. A 1% margin increase on 1 million dollars is $10,000. Many business owners undervalue what they sell because they don’t believe that they are creating value for their customers. By increasing your margins, you will increase your profitability, unless of course you get too greedy and your customers decide to shop elsewhere.
Cutting Overhead: Overhead is what you spend on expenses to run your business. This is an area of focus when we get into trouble or when times are tight, but we forget about it when things are good. Are there areas in your business where you can make some cuts in the near future that will affect your bottom line for the year? Probably!
One way of reducing your stress as a business owner is by increasing your profits to the point where you are sufficiently satisfied with the outcome. For a full comprehensive study on how to turn your business from marginally profitable to healthy profitable, order my book Profit yourself Healthy from Amazon or you can email me firstname.lastname@example.org for a free digital copy. Of course, being human, we will not ever be fully satisfied with anything in life, and most business owners naturally want more when they achieve a level of success. However, if business owners improved their performance by 10% in the areas above, they would double their profits! Yes, I did say double! Work on improving each area simply by 10% and you will double your profits. Tell me how it works out for you. I would love to hear.
Dave Fuller MBA, is an award-winning business coach and the author of the book Profit Yourself Healthy. Dave is a partner in the firm Pivotleader inc. Email questions to email@example.com