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How to make more profit

How to make more profit

As a business owner you will constantly be looking for ways to make more profit, and very often all your efforts are focused on finding more customers. However, this is actually the hardest thing to do, and probably the reason why many people find it so stressful. The good news however, is that there are lots of ways to make more profit, and this guide will give you an overview of them.

In its most basic form there are only two ways to make more profit and anything you do falls in one of these 2 categories:
1. Spend less
2. Earn more

1. SPEND LESS

Spending less is sometimes easier said than done, but it’s worth looking into all your costs and see if and how you can reduce them. A big cost cutting exercise can usually only be done once, because at some point you are the most efficient and have the lowest costs, but you always have to check everything at least once a year to make sure this situation hasn’t changed. Here are a few ideas on how you could reduce your costs:

Premises
* Are you in the right size premises?
* Could you relocate to somewhere smaller?
* Could you use serviced offices?
* Could you have staff working from home?
* Could you renegotiate your rents and rates?
* Could you rent out some of your additional space?

Staff
* Could you outsource instead of employ?
* Could people work part-time (you never know, they might really like it and it costs you less)?
* Are you offering salary sacrifice schemes (where everyone saves money)?
* Could you introduce performance related pay?

Office supplies & telecoms
* Can you go paperless?
* Have you checked your prices recently?
* Are you printing double sided?
* Have you got the right broadband speed and price?
* Can you outsource your IT support and back up on the cloud?

Marketing
* Are you making use of Social Media?
* Have you got a segmented database so you don’t send out generic marketing messages to too many people?
* Do you print the number of leaflets/catalogues/business cards you need or do you print too many because it’s ‘cheaper when you buy more’?
* Do you know the exact ROI of each marketing campaign and do you make sure you only continue with the successful ones?

There are specialist companies such as Auditel who can help you reduce your bills and they will only charge a percentage of the money they’ve saved you, so if you haven’t contacted someone like that yet, make sure you do.

2. EARN MORE

Once again there are only 2 ways to earn more:
* Sell more
* Charge more
Most of the time people focus on selling more, as they are afraid to increase their prices for fear of losing customers. But I’ll show you that by doing that you’re missing out on very valuable business that might not be as hard to get as you think.

Sell more

There are three ways to sell more:
a) Increase the number of customers
b) Increase the quantity they buy from you
c) Increase the number of items they buy from you

a) Increase the number of customers
This is the hardest thing to do and involves all the things most business owners already focus on:
* Business networking
* Email marketing
* Website
* Adwords
* Social Media
* Exhibitions
* Telesales
* Direct Marketing campaigns
* Etc.
What you need to bear in mind is that you will need to both attract more leads and improve your conversion rates, as well as reduce the number of customers that leave. Focus on all of those three things and you will see a marked improvement in your results.

b) Increase the quantity they buy from you
What can you do to encourage your customers to buy more of what you’re selling?
Can you offer them incentives to do so?

If you do, make sure that you keep an eye out for your margin. It’s no good offering two for one, as that means you’re just halving your profit margin, and that’s not the object of this exercise.

Here’s a funny story for some inspiration:

A greengrocer had a sign outside his shop that said “One aubergine £0.25, three for a pound”. Customers came in complaining, saying that for one pound they should be getting 4 aubergines, not 3. The greengrocer agreed and gave the customers 4 for a pound.
A neighbouring shop owner saw this going on for a few days and went to the greengrocer and asked him why he didn’t change the erroneous sign?
‘Why would I?’ said the greengrocer ‘Before I never sold more than one aubergine, and now I keep selling 4 at a time.’
A bit cheeky maybe, but a good example of how thinking creatively can help you increase your sales.

c) Increase the number of items they buy from you
This is about diversifying and offering your customers other things than just what they currently buy. There’s a very useful exercise you can do here: write down all the products/services you offer and then write down which customers buy what. This way you can quickly identify what you could offer to whom and you will be surprised by the effectiveness of this.

Upsell: what are your ‘fries’? At McDonald’s they will always ask if you want fries with that, so what can you offer in addition to what you’re offering now? Amazon is another master of upselling. Have you ever ordered anything from them and been given the option ‘other customers who bought this, also bought the following’? What can you upsell?

And the products/services don’t even have to be yours. You can offer other people’s products and get a commission for every sale. That way you don’t have to produce or stock anything, you’ll offer your customers a bigger choice of products and you can build a good joint venture relationship with the other manufacturers. A triple win-win-win situation!

Charge more

This is the one thing that most business owners really struggle with because they are afraid that they will lose customers. And in reality, they probably will, but they are the kind of customers they don’t really want. You know the ones: they always want the biggest discounts, yet take up most of your time and are least satisfied with your products/services.

Think about the maths for a minute: if you sold 100 items at £10 each you would turnover £1,000. If you increased your price to £20 each, you only need to sell 50 of them to make the same turnover. And here is the good news: making or delivering 50 items is cheaper than making or delivering 100, so you’re increasing your profits even more, and you have to spend less time on servicing a smaller number of good quality customers. True, you might need to do something different in order to find that better calibre of customers, but it’s worth spending the time and the money on it, as you will definitely gain in the end.

Also, it doesn’t just have to be a matter of increasing your prices. It could also be that you offer different packages with varying levels of content. In fact you should always offer three different packages: a basic one, a middle of the road one and a premium one. A staggering 20% of people will buy a premium product if it’s offered to them, so make sure you do.

So charging more is all about being really aware of what it costs you to sell a product, and offering your customers a choice that includes a higher priced item.

If you implement all of the suggestions in this guide I am 100% sure that you will see an increase in your profits within 3 months. By tackling one thing at a time and focusing on it month by month, you will improve your profits, as well as your customer satisfaction and your own work/life balance.

Good luck!

Download your Guide to Profit(PDF) here and feel free to share it with colleagues or business partners.

Remember that as a business coach I can help you with all of these different areas. You can always book a free initial session with me if this is something that you think might be of help to you. Just email me and we’ll arrange a suitable time for the telephone session.

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