How often do you take time out from your busy working day to strategically review your business? There are many ways of increasing profits to consider but with time being a precious resource, there is often not enough hours to implement them all, so here I am going to highlight just three of them to get your mind thinking.
When time is taken to focus on the following three key strategic areas, it can dramatically increase your profits, especially if all are applied and achieved together. Focused efforts to make even very small changes to client or team behaviour can result in increased profits of 33% or more. This is a strategy highlighted to me by Peter Thomson, a specialist in sales techniques.
Here are the three key areas:
Increase revenue from existing clients - draw up a business strategy that identifies how you can sell more products or services to your current client base. Have you identified how to cross-sell to your clients? Could you do a GAP analysis of which products/services each client buys? Can you improve your customer service? Also consider a price increase as just a little can make a big difference.
Create revenue from new clients - increase your marketing efforts to attract new clients to your business. Do you have an expert to help you with this, and when was your marketing strategy last updated? Recommendations and referral schemes are also powerful tools to increase your customer base, how effective is yours? Do you network where you are likely to find more clients?
Generate revenue by encouraging clients to buy more frequently - would the clients benefit from purchasing your services or products more frequently? How can you add extra value or service by encouraging this? What benefits would there be for them to purchase more of what they already buy? Can you identify this and discuss with the client?
When looking at all this in practise, how will efforts in any one of those three areas genuinely affect your profit levels? Let’s take a look:
- Increase average spend of current clients
- Increase number of new clients
- Increase frequency of purchase of all clients
A company that increases revenue by 10% in:
- One of the three areas above without increasing overheads will gain a welcome 10% in profits;
- Two of the three areas above without increasing overheads will gain pleasing 21% in profits;
- All three areas above without increasing overheads will gain a huge 33.1% in profits!
A numerical example of all three together:
Baseline - 100 clients spending £1000, 5 times a year = £500,000
- Increase spend by 10% gives 100 clients spending £110, 5 times a year = £550,000 giving 10% profit.
- Increase no.of clients by 10% and spend by 10% gives 110 clients spending £1100, 5 times a year = £605,000 giving 21% profit.
- Increase frequency of purchase by 10% in addition to above gives 110 clients spending £1100, 5.5 times a year = £665,500 giving 33.1% profit.
Suddenly that time taken to implement these changes seem very, very worthwhile! Applying each of these strategies in a systematic and focused way will have a significant impact on your bottom line and profits.
Create a business strategy for the three key areas above and empower your leadership team to drive change.