In the USA, small and medium enterprise (SME) businesses created about 1.9 million jobs in 2015. That said, not all SMEs are profitable. According to researchers, almost two out of three businesses don’t record any profits or increase in earnings from the previous year of establishment. In business and finance, the rule of thumb is that you can’t increase your earnings directly.
So, without putting proper strategies in place, small business owners might not make reasonable profits. The key to growing profits lies in your ability to control the profit-determining variables.
Generate more business leads
Lead generation is all about the channels you use to attract potential customers to your business. If you can generate more leads, you are on your way to increasing your returns. For example, assuming that 5 of 10 prospects who visit your business eventually order your products, if you can increase that number from 10 to 15, you can record a profit percentage of 50%.
The rate of your lead conversion is another profit variable that should have a good value before profits can roll into your business. The lead conversion rate can measure the effectiveness of your marketing strategies. That’s how many leads are being converted into high-paying customers. If a business owner can ramp up conversion rates from 10% to 20%, the number of sales will double, likewise the profits.
With this in mind, one of the most important duties of sales executives will be to work against the odds and dig out insights that can help the business to convert interested clients to long-term business partners. Therefore, you must consider every single element of the sales process, and hunt for loopholes and resolve them amicably. Since little drops of water make a mighty ocean, making small improvements in every facet of the sales strategies will bring profitable results in the long run.
Make changes to your business operating procedures
If you keep on doing one thing, don’t expect different results. This means to break your current profit records you may have to cross-sell and offer new products or services. This will complement your existing operations and contribute to more returns. For example, a fitness trainer can start selling pre-workout and post-workout supplements to complement their training services for his clients.
When you offer new services to consumers, attach discounts and giveaways to promote it to more audiences. In your administrative operations, cut down your expenses, and do proper auditing. Look into routine tasks that consume so much time, and outsource them to third parties when necessary. If hiring part-time employees is cost-effective, then consider that option by reevaluating your recruitment strategies.
Eliminate sales malpractices
Another way to increase profit is to structure your sales funnel efficiently and guard it against the gray market. Does that sound a little strange to you? Well, a gray market is a form of sales malpractice whereby your products get sold legally to consumers, but without the permission of your brand. This can potentially harm a business’ reputation and also take a dangerous toll on your profit margins. Examples of common products that are sold in the gray markets are drugs, vehicles, cameras, and mobile phones.
When your goods find their ways into the gray market, they will be sold at lower prices. This can cause customers to lose their trust in the quality of your products. Eventually, you will also run into trouble with your distribution networks. When distributors and customers no longer trust your brand, profit levels will fall since they are likely to stop partnering with you. Another example of malpractice can be cited as sales employee misbehavior.
Some untrustworthy employees may contribute to low profits by engaging in counterproductive work behaviors such as stealing and procrastination at the workplace. When this happens, a business cannot make higher profits. You should, therefore, evaluate your employees’ performance and look out for ways to improve it.
Increase the visibility of your business
About 99.9% of the UK’s total business population are classified as SMEs (small and medium-scale enterprises). This means competition is pretty right. So, it’s important to broadcast your business to reach larger audiences, most especially through online environments. Firstly, obtain the requisite business documents that certify that you’re a fully registered (licensed) business brand. Good credibility can vividly distinguish your business from competitors. Secondly, take to digital marketing strategies by setting up your business website, creating social media accounts and engaging with your audience on a personal level.
As you work on improving your online visibility, don’t ignore adverts. Discover new methods to let your brand fly high. For example, you can use affiliate marketing strategies to further attract more customers and earn more revenue.
Automate some management tasks
How effective are your staff in various departments? Are there some manual tasks that can be automated by software? Questions of this nature must be addressed with immediate effect. Launch an innovative system for all your working staff to access data with ease, and make updates from time to time. Synchronizing your business data through automation resources will keep all workers on track and allow you to run the business smoothly. When you are able to replace manual labor with intelligent automation, you can scale down the workload and improve efficiency and profits. Equip your sales teams with customer relationship management (CRM systems). This software will boost your marketing department since you can easily view customers’ journeys through the sales funnels.
Reward your employees
The way you treat your employees can also influence how much profit your business makes. Hard-working employees deserve your acts of appreciation. Motivate them, and they will be encouraged to do more for the business. So, how can you motivate your employees to go the extra mile for your company? You can reward them through job promotions, salary increases, and even by word of mouth.
When your employees are highly motivated, you’ll be able to indirectly convert all of them into salespersons. From telephone conversation to email communication and one-on-one interactions — every employee gets the chance to spread the good name of your business. You could also design custom T-shirts, bags, key-rings, and other promotional kits to advertise your products and services. When you distribute these items to your workers as well as the participants of business seminars, they will market your brand indirectly, everywhere they go.
Be open to change
In some cases, business owners decrease their own profits by failing to discover potential barriers that lock up their products and services from reaching their target audience. Are there hurdles to your purchasing and supply chains? Knockdown those doors by, for example, listening to customer reviews and addressing their concerns. Statistics show that about 50% of disgruntled customers will not return to do business with a company which offered them bad service. The question is — if the customer retention rate of your company goes on a downward spiral, what profits can you possibly make?
Revise your pricing
Study your competitors’ pricing and factor that into your business. If you’re losing customers all of a sudden, it may have something to do with your pricing. When your product quality doesn’t differ much from that of your competitors, you may want to lower the price a bit. If on the other hand, you’re offering more advanced services or products, then you must increase the price to get more profits. Some customers don’t mind buying expensive things once those products solve their problems.
To understand this in great detail, compare Android phones to the iOS brand. An average Android phone can perform virtually any function that the iPhone can do, from call-making to taking selfies, sending emails, and text messages. Even though Android has the largest market, Apple iPhones are overly expensive due to high-tech features and pricing model. Hence, Apple Inc makes huge profits as much as Android.
Replace outdated systems
The machines you use for your work processes can also negatively impact your profit margin. For example, a business which uses outdated enterprise resource planning (ERP) systems can experience low efficiency. Outdated software runs slowly and can break down when overloaded with several tasks. A CEO who seeks to increase his profits should be ready to upgrade archaic business software, and also get rid of materials which add no value to the business.
Lower your break-even point
In business, the break-even point refers to the point where expenditure matches revenue and the company doesn’t make a profit nor a loss. On a monthly basis, how many items do you need to sell before significant profits can be made? Having well-informed ideas about the break-even point can help you to assess the effectiveness of the expenses you make to boost sales. You must see the expenses you make to increase profits as investments. These investments should yield higher returns greater than the costs incurred, only then can you make a profit.
To wrap things up, if small business owners desire to increase their profits, there is a need for them to engineer their business tactics appropriately.