Many business owners want to increase the level of profit in their business, whether this is to pay themselves more, be able to take on staff, invest back into the business, and increase business value before a sale or many other reasons.
The obvious way to increase profits would seem to be to increase sales by finding more customers.
But this isn’t the only way to grow your business and increase business profits. We’ve identified 7 ways to grow your business, only 5 of them involve sales.
We’ve set out below, the strategies you can adopt to achieve growth and profit improvement in your business.
As a starting point we always recommend that you:
- have a business plan which sets out your targets (goals) and identifies actions to help you achieve your goals
- have an annual budget which clearly identifies sales, profit and cash targets
- have 4-5 KPI’s (key performance indicators) which you measure on a regular basis. These can be financial and non-financial
- have someone outside of the business hold you accountable to your plan
Ok, so here’s the 7 ways to grow your business:
1) Increase customer retention rate
It’s much cheaper to make sales to existing customers, in fact statistics show that it’s up to six times easier and cheaper to make sales to existing customers than it is to new customers.
What are you doing to delight your customers and make them want to return to you?
Do you know what it is your customers want?
What is your current communication strategy with your customers?
Here are some customer retention strategies you can use in your business:
- Loyalty programmes
- Customer surveys (ask them what they want)
- Follow up with customers after they’ve made a purchase
- Social activities
2) Generate more leads
The second way to grow your business is to generate more leads.
Do you know the difference between a suspect, a lead, a prospect, a customer, a loyal customer, and a raving advocate?
Do you have a Customer Relationship Management or CRM system? Is it up to date? How do you keep track of your leads to ensure they are followed up? Who is your target market? Where are they in the highest numbers?
You need to understand this in order to tailor your marketing to the right people.
Lead generation strategies you can use:
- Attending events
- Networking
- Newsletters
- Strategic alliances/partnerships
- Website
- Blogs
- Open days
3) Increase conversion rate
The third way to grow your business is to increase your conversion rate.
Are you measuring your success at converting leads, quotes and proposals to sales?
Do you regularly review why you aren’t converting more of them?
Are there stand out performers in your team who have a higher than average conversion rate? Are you using the right people in the sales process?
Your conversion rate might be sales made as a percentage of proposals delivered or sales meetings held. If you’re not measuring these, you need to start right now.
Ways to increase your conversion rate include:
- Use a follow up system
- Guarantees
- Sales training
- Proposals with options (a choice of yeses)
4) Increase sales transaction frequency
The fourth way to grow your business is to increase transaction frequency.
It’s much harder to sell to new customers than it is to sell to existing customers. It makes sense then to encourage those customers to buy from you more often.
Strategies you can use to increase transaction frequency:
- Newsletters
- Special offers
- Loyalty events/programmes
- Reminders
- Introducing VIP / membership cards
5) Increase transaction value
The fifth way to grow your business is to increase the transaction value.
This doesn’t necessarily mean increasing your prices.
How can you add more value to your customers? Do you give them a range of options? Do you make it clear what you are offering?
Don’t assume they already know – ask them! Follow the ‘would you like fries with that?’ concept.
Transaction value strategies could include:
- Four for the price of three
- Discount for add-on sales
- Increasing price
- Up-selling
- Proposals with options (the choice of yeses)
- Stop offering discounts unless the customer has purchased an add-on.
6) Reduce variable costs
The sixth way to grow your business is to reduce your variable costs (cost of sales).
Variable costs are those costs which increase as sales increase.
Being able to control these costs better can help you improve your gross profit margin (profit made on each sale excluding overhead costs).
Some cost control/reduction strategies are:
- Improving supplier payment terms
- Early payment discounts
- Reduce wastage
- Better systems and processes to increase efficiency
- Record material usage and time spent (measure, review and improve)
7) Reduce overheads
The seventh way to grow your business is to reduce overheads.
These are the fixed costs in your business, such as rent, telephone and internet, light and heat, bank charges and interest.
At the very least you should review your overheads annually as part of your business budget process.
We recommend that you review your Xero reports to that measure costs levels and then implement changes which can help you to reduce these costs.
Next steps
Small improvements in several of these areas can have a dramatic effect on the growth in sales and profits of your business.
Blog by Telfords Accountants If you’d like to find out more about how we work with clients to help them to grow their businesses, please get in touch.