While consulting small businesses over the past 15 years I discovered there is actually only five definitive ways to increase your bottom line profits.
1. Reduce your costs.
When a business endeavors to decrease costs, the initial place to start is with inanimate objects. A large amount businesses can trim thousands of dollars in fluff per month. Perhaps there are extra phone lines you can cancel, you may perhaps downsize your garbage can pickup, retract client lunches, fire the cleaning lady and give a couple more hours to your sales staff to clean, etc.
Another way to “trim the fat” is employees. Small businesses need to define the slackers and purge them from the team. As harsh as that may sound, in general, companies tend to retain at least one or two too many workers for the workload they in reality have.
If laying people off is too extreme then i advocate cutting hours of the lacking employees or at least hand out pay cuts. Other thoughts consist of cutting expenses on rent/mortgage, insurance, payroll, accounting, electric, etc. Shop and negotiate for reduced payments. On a side note, beware of cutting from your advertising budget. You ought to inspect your marketing and make sure you are receiving the most bang for your buck., but don’t cut it out. Advertising should in fact be increased if it’s getting your return on investment.
And lastly, you must analyze your cost of goods. Many businesses neglect the bottom line price per item. Take into account the cost of shipping, storing, boxing etc. It’s a good idea to find your lowest gross margin item and discontinue it.
2. Increase Margins.
Find your highest gross margin item and focus on it. If you have a retail store put it in the prime real estate, if you sell intangibles, make awesome new sales pieces for that item and lead with that Item.
Another way to increase margins is to buy right, “buy low sell high”! Buy lower sell higher! Possibly you look for sales, free shipping deals, closeouts, etc.
3. Increase Prospects/ Leads
Whether it’s pounding the street, networking, conventional advertising or sending emails to your database, find a approach to escalate leads and prospective consumers. If you are in retail put out a few new signs or banners, if you sell intangibles, network and implement database advertising.
4. Close More Sales
It’s not sufficient to catch them… you have to skin them as well. Set up a follow up system that follows up with prospects that didn’t buy. They say it takes five or six contacts before the majority of sales are completed.
5. Boost Frequency of Sales
It’s been proven that it’s 60-80% easier to sell a current client then a new one. Spend some extra time with your top 20% of your customers. Show them other products or get them to increase frequency of their purchase.
Bonus: Each of these steps may seem overwhelming… the secret is to takes steps forward daily. If you get stuck, you may want to hire a business consultant or business coach to get you over the hump. Their value should be worth 10 times the cost.
In the end, each of these steps individually will increase your bottom line, however if you implement all five of these steps, you should effectively over double your bottom line!
