Many of you have been asking me how to grow your business. First of all, it is important to determine what exactly you mean by business growth. Today I want to talk about the basics of business growth. In the coming weeks, I will share advice about the main types of business growth strategies, how to grow your business when money is limited, and how to design the growth strategy that is best suited to your business. But our first step today is to determine what exactly you mean when you say you want to grow your business.
Is it that people are not buying, and you want them to start buying?
In this case, your first job is to find out what is going on. Are you sure that you are selling things that your customers want? Are you selling the same things a whole lot of other people are also selling? If yes, what makes you different from your competitors? Meaning, why should people buy from you instead of from them?
Check out this post to find out how to determine whether there is a need in the market and how to set your business apart from other businesses. You can also review the post that I wrote about how to get new customers. If you cannot find a need in the market, you can check out this other post for another strategy about starting a business.
Is it that customers buy from you once and never return?
If yes, then the issue you are facing is how to retain your customers. There are many reasons why customers only buy once and then never return. It may be that they did not like how they were treated at your business. Maybe the quality of your product is bad. Maybe their financial situation changed. Or maybe, there is a new competitor on the market selling at lower prices.
To find out why customers are leaving your business, check out this post. If you have found out the reason why they are leaving, there are various strategies that you can use to retain customers. This post will show you the basic customer retention strategies. Once you have mastered the basics, you can move to the advanced customer retention strategies.
Is it that you are not seeing any profit from the business?
In this case, the first step is to determine whether you are charging the correct price for your products or services. Before you say “Yes”, have you taken all your business expenses into account, including indirect expenses like transportation, maintenance and cleaning supplies? Have you also included all the personal expenses that your business is supposed to pay for, like your home rent and your children’s school fees? I advise that you record all your daily expenses for 1 – 3 months to see if your list is complete. Find out how to do good record keeping in this post.
The price you are charging per product (or service) should be enough to cover all the direct and indirect costs and still give you a profit. If that is not the case, you will need to:
- reduce your costs
- increase the price or
- find other things to sell that are more profitable. I will write about cost calculation and cost reduction in future blog posts.
Starting point for business growth
To grow your business, it must first be successful. If your business is not yet successful, you will need to make it successful before you can start thinking about business growth.
So how can you make your business successful?
Step 1 to success: master basic business management skills
An entrepreneur who is successful has mastered the following basic business management skills:
- Record keeping/administration
- Basic finances including having a good overview of all business expenses, knowing how to estimate how much you will be able to sell this year, how to calculate your gross profit, and how to calculate your net profit
- Business operations & planning, particularly knowing how to create a yearly business budget
- Marketing, including how to do basic online marketing, how to increase your sales without spending money, and knowing the best sales strategies for small businesses
- Human resources management (HRM) –> if he/she has employees
It does not matter whether your business management is done on paper or on the computer. The important thing is that it should be carried out. But it should not just be in your head. To understand how your business is doing, you need to put that information on paper or in your laptop so you can see the actual information laid out in front of you.
Note: Those of you that asked me to give advice about business management, it will follow after this series about business growth. I am also designing some online tools to help you manage your business.
Step 2 to success: control your finances
This is something that you will hear me talk about very often because if you cannot control your finances, your business will not grow. There are 3 key strategies:
1. Keep your costs as low as possible
The main way to grow your business is to increase your profit. You can increase your profit by reducing costs. As a business owner, monitor the costs of running the business and getting your product to customers.
For example, if you manufacture products, it is important to look for ways to maintain quality and still reduce costs. Having long term agreements with suppliers will allow you to reduce your purchasing costs. You could also select 3 suppliers to be in a supply pool and ask them to submit bids whenever you need to buy something. As for getting your product to customers, doing free marketing promotions online will reduce your marketing expenses.
Do not forget to evaluate the products or services you are selling. Is each of your products (or services) making profit? Calculate the cost price of each product to understand how much it is contributing to your business. If you find out that certain products (or services) have low profit margins, ask yourself if you should keep selling them. If you find out that you are selling a certain product at a loss, increase the price. If that is not viable, drop it as quickly as possible.
Note: Whatever you do, your decisions should not have a negative impact on your customer or staff satisfaction!
2. Cash is king for every small business
If you want your business to be successful, mind the money. If you want your business to grow, mind the money.
When is money coming in? When is money going out? Do you have this cash flow forecast for the coming 12 months? If you do not have it, I advise you to take some time to put it together. Make a list of all your expenses per month. Make sure to include the expenses that only come once every 3 – 4 months (like equipment maintenance) or even once a year (like rent). Do the same for your expected income. Are there gaps? If yes, you need a strategy.
If you give credit to customers, this will affect your cash flow. Are you making enough sales (and profits) to cover all expenses during the time that customers are not paying? If not, you may need to revise your credit policy. Or find a way to increase your sales. If your business has many delinquent customers, you will also need a strategy to address that issue.
There are many free cash flow forecasts online. You can do a Google search, but I will also make one available soon.
3. Invest your profits in the business
This is a big issue for many entrepreneurs. As soon as they make additional profit, they buy an expensive phone or watch, they buy expensive toys for their children, or they go and spend the money in other ways.
I am not saying you should not enjoy your success. But if you want your business to grow, you need to be careful about how you spend the profits. For example, if you have additional net profit, use 5 – 10% of that money to enjoy yourself and treat your family or friends. The other 90 – 95%? Put it back in the business. Use it to expand your inventory, to introduce products with a higher profit margin, to train your staff or even to improve your own business skills. Don’t forget to share with your family about how you are running the business so you can manage their expectations! 😊
Step 3 to success: increase your sales
Basically, there are 3 ways to increase sales:
1. Get new customers and boost business growth
I wrote a detailed blog post about how to get new customers so I will just give you some key points.
The best way to get new customers is through word-of-mouth. But you need to make it easy for your existing customers to bring new customers to your business! One way to do so is to give discounts to anybody who brings you new business.
2. Increase the profit you are getting from each sale
To increase the profit you are getting from each sale, you have to increase the value of every transaction. Meaning that the customer will buy more from you whenever they visit you.
One way to achieve is by offering what is called up-sells. Up-sells are like add-ons. For example, if you buy a pair of shoes, the salesperson may also try to sell you shoe polish and a shoe brush. Or if you go to buy a new printer, they offer you a discount on a package of 3 cartridges. At the end of the day, you came to buy 1 thing, and you leave the store with 2 or more things.
Find a way to package certain products (or product + service) in your business. And make sure that the price of the package is a little less as compared to buying the items separately.
3. Convince your customers to buy from you more often
This strategy will require you to keep encouraging your customers to come back to your business. There are many ways to do this. You can offer a discount on their next purchase. (Make sure that discount is time limited or else you may not see them again until after 8 months!) If your business is more advanced, you can offer a customer loyalty programme.
If you have a customer database, you can send them exclusive special offers to encourage them to come back. This is easy to do if your customers have email because you can then use email marketing. Check out Mailchimp if you need a free digital customer database that includes high-quality email marketing.
However, if you do not have a customer database, you can use your Facebook page to share exclusive offers and discounts to encourage them to come back. Check out my post about how to retain customers for some more ideas.