Proven Strategies for Multiplying Profits
In past columns, I've talked about the " 5 Ways ": a simple formula designed to multiply profits no matter what type of company you may want to (or currently) own.
When I talk about the "5 Ways," I am saying that there are only five ways to truly grow your business: getting more leads, converting those leads into customers, getting customers to make bigger purchases at higher price points, getting them to buy more often, and getting more sales at higher profit margins.
If you increase all of those factors by just 10 percent, you can give your bottom line a massive boost.
But how can you do this simply and cost-effectively?
In general, you want to focus on the "lowest-hanging fruit" in your business. That means you can work the "5 Ways" backwards and start with your profit margins first. In most cases, this means you focus on lead generation last, since it is the most costly way to leverage your efforts. Unless the other numbers are in place, you could end up wasting your efforts and resources.
I want to share five simple, proven (and low-cost) strategies you can use immediately to get those increases to start feeding more profit to your bottom line.
The best part? Most of them involve resources you probably already have in your business, or little "tweaks" to strategies you may be using or have used in the past.
To increase your profit margins:
1. Find your bestselling product and increase the price by 10 percent. If you don't know what your strongest product is (or what it could be), now is the time to find out. Once you figure it out, boost the price on that item or service by 10 percent. It's an increase so small, most people won't even notice. If someone does notice and gets irate, you probably don't want them as a customer anymore anyway.
To increase your average dollar sale:
2. Create sales scripts for you (and your salespeople). Sales scripts help to frame your sales process, especially if you don't consider yourself a natural "salesperson." The sales script should also help initiate and build rapport, which leads to higher sales.
To increase your average number of transactions:
3. Create loyalty and referral programs. While a lot of companies use this strategy, many don't use it correctly, or lose out on the opportunity to create additional value from these programs. To get the most out of a reward program, it should be targeted at your highest-yield customers--those truly loyal customers who don't haggle on price. This involves some due diligence on your part for segmenting your customers. Done right, you can create both a rewards program and a referral program that is profitable vs. one that simply defaults to discounts or giveaways.
To increase your conversion rates:
4. Create a guarantee, especially if none of your competitors have one. Guarantees are great ways to covert customers and establish long-term customer relationships. This is especially true in categories where guarantees are hard to "guarantee".or in industries that don't offer any. For example: An IT company worked for more than a year to develop a guarantee of service and performance they could back up and honor. The result is that they are the only company in the city that can advertise and claim a guarantee. Not only has this boosted their referral rate among current clients, but it has also helped increase the company's number of qualified leads.
To increase your number of leads:
5. Test and measure low-cost ways first; then move to paid advertising. As I said before, lead generation is actually the most costly of profit-boosting strategies, so start with low-cost ways you can track for results before you start spending thousands of dollars on an advertising or PR campaign. What's low cost? These days, it could be as simple as a direct-response ad in a newsletter or trade publication. Online is also a great way to go, with a good website and online classifieds leading the way for low- or no-cost lead generation. The key is to make sure you are on target with your media and your audience, you have a compelling offer, and your copy is both sales- and response-oriented.
Remember, you are looking for incremental increases at the start to begin to see results in your bottom line. A 10 percent increase in each of these areas will make a significant impact on your profits as long as you keep your costs in check.