If you are struggling to make a business more profitable, it can be challenging to find the best strategy to change the situation. Here are 5 ways that can help you turn things around.
1. Make money by saving money
Your business makes money by selling products or services. To sell your products or services, you follow certain processes.
- A manufacturing process to produce goods.
- A procurement process to get items to sell at retail.
- Or a work process to deliver services.
Evaluate your processes and look for ways to save money.
- This could be by improving the efficiency in your production process.
- It could be through better negotiation of contracts.
- It could even be by buying new software or outsourcing part of your work so that you can save money in the long run.
Any money you save means less money will be leaving your business.
2. Choose one product to bring in more customers
You can increase your profitability by using a particular strategy to attract customers.
Start by choosing a specific product or service that is very basic but that is something that you know is of interest to your customers.
Start selling this particular product at a lower price. Communicate the change in price to your customers in your marketing. This will start attracting new customers.
Once customers start buying this product, you start encouraging them to buy additional products.
- you can offer them a discount to buy a higher-priced product
- you can create bundles that include multiple products to get a higher revenue
- you can also introduce strategies to retain them and keep them coming back
For inspiration, check out some online businesses, like Amazon or Alibaba. When you add something to your basket, you will see additional product recommendations or a message saying that other customers were also interested in certain products. Most of these products are higher priced.
You can also see this strategy in action at many software companies. You can get a very basic software service for free or by creating an account – see, for example, Canva or Mailchimp. But if you want more options or more professional tools, you have to buy a more expensive service.
Study these companies to understand their marketing. Then apply the same strategy in your business.
3. Encourage customers to spend more money
One of the best ways to make a business more profitable is to encourage customers to spend more money.
Let me explain this through an example.
Your business gets 20 customers every week. Each customer spends, on average, €50 when they come to you. This means that every week, you make €1000.
If you can make each of these customers spend €75 instead of €50, you can add €500 in sales every week without having to spend money.
So, how do you do this?
You learn how to do upselling and cross-selling.
- Upselling means convincing your customer to buy a more expensive product or service.
- Cross-selling means convincing your customer to buy additional items that complement the initial purchase.
Let me give an example of a sports trainer who coaches local sports teams. Your training is effective and sports teams start getting better results after you coach them.
- One of the ways for you to do upselling is by adding personal training services. You use your knowledge to offer group training sessions to sporters, maybe through your local gym.
- You can also offer more exclusive services through one-on-one coaching.
As a sports trainer, you know how to avoid injuries and how to treat them if they occur. You could decide to start working with a qualified physical therapist to offer additional services to sports teams or athletes.
You can also start offering the training materials – like weights, stretch bands and exercise balls – that help injured sporters regain their health faster. These items could also be offered through your group training classes.
Upselling and cross-selling help you increase your revenue streams, as long as you can guarantee that what you are offering is what your customers need and the quality is high.
4. Introduce new sources of revenue
What products or services do your customers buy from you? Are there other products or services that are closely related to what you sell and that your customers also buy?
If yes, you may be able to create new sources of revenue by adding these products or services to your business.
- Start by analysing the best-selling products or services in your business.
- Do some research into related products/services that your customers buy.
- Pay close attention to customer requests. Are there certain products/services that they keep asking for and that are profitable? These are products that you might be able to add to make a business more profitable.
- Do some research to determine how many people will want to buy. For example, you could keep track of the number of people that ask for the product or service. You could also run a poll on Facebook. Or, you could hang up a form in your business where interested customers can leave their contact details.
- Finally, see how best you can add these products or services to your business.
5. Make time to follow up with potential customers
As a business owner, many opportunities come your way every week. Too many for you to actually follow up on. Most of the time, you only follow up on the opportunities that you believe will lead to a purchase. And even then, most businesses will only follow up once or twice.
There are two problems with this approach:
- one, you are wasting the marketing money and the time you spent to make the customer know about your product or service. If you don’t follow up often enough, you are not getting the maximum revenue from your marketing.
- two, you lose touch with potential customers. Maybe this customer is not yet ready to buy from you because they are still doing research or because they have other things that are a higher priority. If you stop following up with them, they may no longer consider you when they are ready to buy.
You can solve these problems by having a clear plan to follow up with potential customers. Your plan should include what information you will share with them.
- This could be a monthly email newsletter if you have your customer’s email addresses
- It could be a monthly raffle on Facebook to encourage them to keep coming back to your business
Whichever way you choose to keep in touch with your customers, make sure to keep informing them about your products and services so that when they are ready to buy, you will be top of mind.
If you find your profits falling behind or turning into losses, the best way to make a business more profitable is to take action.
Start by picking the low-hanging fruit. Start by looking for ways to reduce money and then focus on getting more customers. Also find ways to encourage your customers to spend more money in your business and, if it makes sense business-wise, introduce new products and services to generate more revenue. Finally, don’t forget to keep following up with potential customers to ensure that you remain top of mind.
These strategies are easy to implement and most only require some time and effort from you. All of them will help to make a business more profitable.