So often, business people forget the basic equation of how to run a business. Hi, my name is Bernie Heine and today I’d like to talk little bit about the seven strategies that work together to double your business profits.
Now that sounds a little bit unbelievable, how are we going to double our profits? But by making just 10% improvements in each of the seven areas I’m about to talk about, if you do the math you’ll see it actually can double the profits, or even more, increase the profits of your business. So often, people forget about this basic relationship: we have to sell to more people, we have to sell them more stuff, we have to sell it at a higher margin, we have to reduce our costs, and if we just go to that very simple calculation you have profits at the end. If we work on each one of the seven elements and just make even a 10% improvement, you’ll see how that drops right to the bottom line and can double the profits of the company.
Find New Customers
So what’s the first one? The first thing is we have to get out and meet new people. One of the strategies is that we have to have our marketing focused on benefits. What are we doing for the customer? Remember, they only listen to that one radio station, WIIFM (what’s in it for me). So we need to have benefits-focused marketing, so that we can attract the most new people to the business.
Remember Your Existing Customers
The second one is about our existing customers. I have a client who had a database of 600 past customers. What did he do? He marketed to new people all the time. He had zero strategies, no money at all spent marketing to 600 people, and spent all his money, about $10,000 a year looking for new customers. So what are we doing to stay in communication with our current customers? Are we involving them in some kind of a communication, whether it’s a newsletter or we’re having direct outreach, but keeping in close contact with existing customers.
Learn Why Customers Leave
The third one is what about past customers? Why did they leave, do we even know? Most businesses don’t spend any time at all analyzing why people are going out the back door, because we’re so busy focusing on the fun stuff bringing them in the front door, all the fun marketing ideas. But what about why they’re going out the back? So doing a bit of an analysis on why they left, and then if we fix that we can get them to come back, give them a special offer.
Convert Prospects into Consistent Buyers
So now we have to convert more of them. How are we going to get more of these people to move from being a prospect, somebody that might have responded to an ad, to becoming a paid customer? This is about having a sales process. How do you bring them through the funnel? How do you move them through the process? Do you do it in a systematic way that you can improve on time and time again? This means having a sales process and detailing it out with flowcharts. Even if you’re a one person company, you can still assign yourself the tasks of moving through the sales process, knowing where you are with each individual.
Increase Sales Volume with Upsells and Add-Ons
Once we have them, now we want to sell them as much as we can. So how do we increase the percentage that they’re buying from us? With this, a key strategy is upsells and add-ons. So what else can we do for them? Sure, they’re interested in this part of our services or this product that we sell, but what else can we do for them? If we’ve done a great job in the sales process of analyzing their needs, we might know of some other ways we can help them to go beyond just the basic product that we have.
Raise Prices to Increase Gross Margins
The next step is to increase our gross margin. So how can we cut costs and raise prices so that we have better margins on our products? I mention raising prices and most people think yeah right we can’t do that, but what I find is that most entrepreneurs undervalue their own services – they just don’t believe enough in their own products to raise prices, and they just need to take that step because so often if you do the calculations, you’ll show that by raising prices you make a dramatic increase in your profitability, and often times you only lose a little bit of your business.
In fact, you can afford to lose more business in that direction than if you say the opposite, which is hey we’re going to cut prices. Often times if your business is a 30% margin business, if you cut prices by 10% you have to add like 50% more business in order to get back to where you started from. So it’s a lot easier to raise profitability by raising prices, and the likelihood of losing business is much lower than hoping that we’re going to gain more sales by lowering our prices.
Reduce Fixed Costs
The next step down his what about our fixed costs? How often do you do an audit of all your fixed costs, are you really getting the full value for everything that you’re paying for in your business? Often times we just pay bills without thinking about if we’re really getting what we should be getting for those things. So negotiate those prices and work on reducing your fixed costs so that the bottom line is the profits will come out.
So if you go through the all the steps, just making a 10% improvement on each one of those, areas you’ll be happily surprised to see a doubling of your income.