Does your business have a sales focus or a profit focus?
In our experience, too many business owners and their sales team are motivated by top line revenue rather than bottom line profit. To change this focus we often talk of four key drivers that can help increase profitability; reducing costs, increasing turnover, increasing productivity and increasing efficiency.
1. Increase your sales price
In many cases, you can successfully increase sales prices between 5-10% without experiencing any customer resistance. Generally, if your products are of good quality and you provide good customer service, a small increase will not drive customers to your competitors. Importantly, increasing your sales price goes straight to the bottom line. If you sell exactly the same number of products as before, both your turnover and your profits will increase.
2. Increase profit margin per sale
Profit margin is the profit you generate from the sale of each product or service less the direct costs associated with that product or service. In lowering your direct costs you can generate more profit per sale and each dollar decrease flows straight to the bottom line as profit. When was the last time you negotiated prices with suppliers?
3. Increase number of transactions
Review the number of individual sales that you make to each of your customers. By increasing the frequency of purchases by 10%, you increase your sales and profits by the same percentage. What are some things that you could do to get your customers to buy more frequently from you.?
4. Increase the size of each transaction
It is crucial to a business that you are continually looking for ways to up-sell each customer so that they buy more on each purchase. Think about how the ‘Would you like fries with that?’ approach can apply to your business.
5. Remove under-performing suppliers, customers and staff
Most business owners think they need to generate more sales from more customers and this will lead to a better bottom line. This is often not the case. Review your customer list; are there some that are not worth supplying to? Are you losing out on better sales by focusing on demanding customers? Sometimes a good spring clean is necessary in a business. When reviewing your customers consider the margin you make on that customer, discounts that they take, the demands they place on your business, and importantly, when they pay you. Business owners should not be afraid to sack customers that provide volume but not profit.
6. What sets your business apart from your competitors?
What makes you different from the rest? Why should people buy from you rather than the competition? Be able to articulate the ‘why’ and ‘what’ of your business in a way that is truly effective. You should be able to do it in ten words or less and this should flow through to the products you supply and the manner in which you supply them.
7. Customer referrals
Referrals are the easiest and cheapest way to generate new sales. Developing one or more proven referral systems for your business can have a significant impact on your sales and assist in making you more money. And don’t be afraid to thank and reward customers who refer you!
8. Lead generation
If 5 out of 10 prospects who come into your place of business end up buying from you and you can increase the number of people coming in from 10 to 15, you can make more money and increase profits by 50 percent. Importantly, measure your pipeline of opportunities and make sure that your business is nimble enough to change when you notice trends emerging.
9. Lead Conversion
Converting more leads into the right type of customer is vital for a business. Lead conversion should be monitored and measured on a regular basis as this is a measure of the effectiveness of your sales efforts. If you can increase your conversion rate from one of ten to two out of ten, you can double your sales and increase profits.
10. Customer contact
Run a customer survey right now – simply talking to existing and past customers will generate more business. Most defecting customers are content as someone else came along who wanted their business more than you did. Make sure that the quality of your product or service is not letting the business down, and if it is, make whatever changes are necessary to fix it.
The first step is to take action. What are you waiting for? Don’t procrastinate. The faster you make the tough decisions and get on with it – the sooner you will see the positive results. By focusing on the above areas in your business you will continuously improve, increase profit and help contribute to your future financial success. Contact our Advisory Specialists today or call (03) 9835 8200.