Ultimately, the aim of any business is to make money. Of course, there are also plenty of other benefits that come along with being a business owner, such as increased freedom and more time to spend on what’s important to you. But at the end of the day, a business is not viable in the long term unless it is making a profit! Often, it can be hard for small businesses to turn a healthy profit, especially if they are brand new. If you are struggling with this, then all hope is not lost! From my experience coaching small business owners, I know what makes a small operation tick. This includes the steps that the owners can take to increase their profits and grow their business as a result. Many of these tips are actually surprisingly simple! You just need to put a plan of action in place to ensure that they all get done. So, if you’re interested in learning more about how to boost your profits as a small business owner, keep on reading…
What have I learned about boosting profits from coaching small business owners?
Often, operating a small business involves managing a fine balance between the cash coming in and the cash coming out. This is especially tricky for brand new entrepreneurs to master. But, these simple tips should help this become easier. As with anything, practice makes perfect! It can be frustrating to feel as though your profits are not where they should be, but don’t give up. Almost any business can become profitable in time, with the right tools and strategies in place.
Get rid of the products and services that aren’t making you money
Almost every business faces this conundrum at some point in its journey. It sells a range of products and services, but only some of them actually make a profit for the company. This can be disheartening for any business owner. They spend lots of time, effort, and resources on perfecting their offerings, only for customers not being willing to pay what it’s worth. So, what should you do? Continue to sell these products or services at a loss or break-even point? Or, get rid of them from your offering entirely? If you are looking to boost your profits as a company, I would recommend doing the latter. Yes, it hurts to get rid of something you care about, but it will free up time and space to focus on those products and services that are actually making you money. These are the ones that should be the most important to your company, and you can all but forget about the rest. If you think that the unprofitable lines could be improved in order to make you money in the future, then this is another avenue that you could consider. Overall, though, the aim is to focus on a streamlined core offering that reflects what your small business does and brings in the cash you need.
It may be painful, but getting rid of what’s not making you money can really help your profits.
Reduce your costs
This seems like a very simple idea, but from my time coaching small business owners, you may be surprised by how many are reluctant to do this in order to increase their profits! It makes sense that, as your costs go down, your profits go up, without you even having to find new customers. So, it should be a no-brainer for any entrepreneur who wants to make more money. There are a few key ways in which you can do this, which are as follows:
- Streamline your inventory. Often, businesses have a lot of cash tied up in inventory that is just sitting there, waiting to be sold. In the future, could you reduce the amount of stock that you hold in order to free up some of this cash?
- Negotiate with your suppliers for a cheaper price. No matter what your business sells, it’s likely that you use suppliers somewhere in the chain. And, this is probably quite a high cost for you! Go to your suppliers and see if they can offer you any form of discount. This is more likely to work if you have been a loyal customer of theirs for some time, but it can work for even the smallest businesses. It’s certainly worth a try, as the less money you are paying to suppliers, the more money is freed up for your profits.
- Review your current outgoings. What else are you spending money on in your business? Now you are looking to hold less inventory could you move to smaller premises? Is there anything that you are currently spending money on that you could cut out? These expenses quickly add up, and what seems like a small purchase becomes a series of purchases that turn into a whole lot of money spent. By reducing this as much as possible, your profits should naturally start to increase.
Work on strategies to retain your existing customers
It makes sense that, in order to make a higher profit, you should look to increase your sales. And that means more customers! However, attracting new customers can be an expensive process. You need to spend on the sales and marketing process in order to make them aware of your brand and entice them to buy from you. But, from coaching small business owners, I know that it is the companies that focus on retaining existing customers that often see a bigger improvement in terms of profits. It’s far cheaper for a business to have a customer buy from them twice, compared to two customers each buying from them once. So, if you want to see an improvement in your profits, you need to work on your customer retention strategy. Some ideas to do this include:
- Offer incentives for customers to keep on coming back, such as a discount code off their next purchase. This entices them to shop with you again as they know it will be a little bit cheaper!
- Build a database of customer details and regularly reach out to them through email marketing. Doing this will remind your customers of your existence on a regular basis, which might just be enough to encourage them to buy again.
- Provide excellent customer service, above and beyond that of your competitors. Never underestimate the power customer service has to either turn customers away for good or keep them coming back for more.
- Start a loyalty or referral programme for your customers, where they get a discount code or free gift after a certain number of purchases, or if they refer a friend to your business. This encourages them to use you again and again, and spread the word about you among their family and friends. Word-of-mouth recommendations can be an excellent source of new customers without you having to spend too much on attracting them, so it’s a win-win situation!
Increase your conversion rate
Speaking of customers, another good way to increase your profits is by also increasing your conversion rate. Do you know how many of your sales leads actually convert into paying customers? Can this number be improved? The higher your conversion rate is, the more cost-effective your marketing and lead generation activities are. Some ideas to improve your conversion rates include:
- Make it easy for your customers to buy from you. On your website, don’t hide away ‘buy now’ buttons or the shopping cart. Make sure they’re front and centre so your customers find it easy to purchase with minimal fuss.
- Show your customers why they should buy from you at every opportunity. Provide reviews on your website and social media to let potential customers know that others enjoy purchasing from you.
- Track how people interact with your website. Is there a certain point where they are most likely to lose interest and click off? If so, figure out what’s going wrong and take the steps to fix it!
- Optimise your email campaigns to target people who have almost checked out from your site, but abandoned their purchases at the last minute. This may just persuade them to come back and make that purchase!
Take a look at your pricing strategies
The right pricing is vital for profitability.
Finally, pricing is important. From coaching small business owners, I know that many of them are reluctant to charge what they are actually worth, especially when they are just starting out! But, this can be a big mistake when it comes to increasing your profits. Take a look at what you are currently charging. Do you honestly feel as though it is enough for all of the work you put in? What would happen If you raised your prices? Do you think your customers would keep on buying? If not, why not? What can you offer to make your product or service the best in the business, and one that customers are willing to pay higher prices for? Also, bear in mind that even a small price increase can have a big knock-on effect on your profits. Don’t be afraid to charge more (if what you offer is worth it), and you should soon start to see your profits rise, as long as you do not start spending more too!
Final thoughts: could coaching small business owners help you?
Of course, increasing your profits is probably not something that is going to happen totally overnight. But, with a little hard work and consistency, these simple strategies should help you to do it. If you are struggling to devise a plan to increase your profits on your own, the services of a business coach would be helpful for you. For example, I work with my clients to deliver proven strategies for growth. The main aim is to make them more money- what business owner doesn’t want that? If this sounds like the sort of coach you think your small business could benefit from, then I would love to hear from you. Get in touch today on email@example.com to find out more.