Small business owners need to change their practices to focus more on profit, according to Patricia Sigmon, founder and president of David Advisory Group, a firm that specializes in helping CEOs and small- to mid-sized businesses re-engineer their business practices.
Sigmon, the author of the book, “Six Steps to Creating Profit,” notes that nearly two-thirds of small businesses either don’t make a profit or fail to increase their profits from the year before.
Sigmon shares six key strategies small business owners can use to cut costs, increase profits, and improve their bottom lines.
1. Change Operating Procedures
You need to generate more sales while reducing expenses. To increase your sales, try cross-selling—offering new services or goods that complement your current offerings. For example, a chiropractor might also sell vitamins. Another operational change that can increase profits is incentivizing new customers to try your product with specials deals, discounts, or short-term giveaways.
Try switching to a relationship-based sales model that gets customers coming back to you by offering monthly or yearly service plans, or a bundle of visits at a discounted price—like a series of 10 gym visits.
On the flip side, to trim expenses, try auditing your administrative functions. Are there routine tasks you could afford to outsource or eliminate to save money? Would it be more cost-effective to hire part-time help instead of a full-time employee to do some of these tasks?
2. Stay Visible and Connected
Accreditations, licenses, and certifications for your business or individual employees can set you apart from your competition. Take your reputation online, using social media, your website, and a blog to connect with clients and make strategic alliances.
Use advertisement sharing with complementary businesses, find ways to leverage referral selling, and take advantage of affiliate marketing tools to drive new customers to your site. Eliminate stale, ineffective alliances that may be dragging you down.
3. Maximize Your Cash Flow
One of the best ways to achieve a stable cash flow is to offer pre-paid retainers or ongoing payment plans for your clients. For example, instead of a one-off consulting contract at $125 per hour for a full day, tweak your offering and give them a discounted 20-hour retainer plan at $100 per hour. While your hourly rate would be less in this case, you’ll be billing for a greater total dollar amount, and locking your client into a longer-term arrangement.
At first, this may not seem as lucrative, but it establishes a relationship and keeps the door open for additional work. Maintenance contracts for service-based businesses are another way to create a new revenue stream.
4. Streamline Management Costs
How efficient are your employees? How many customer leads do you get? How much are you owed in accounts receivable? Questions like these need to be answered immediately, and to do so, you need to automate your business.
Create a system for employees to access and add data, keep all information updated and synchronized, and be sure to build in back-office administrative time into your project fees, hourly rates, or ongoing charges. Automation allows your business to run smoothly and will help a scaled-down workforce accomplish more back-office work.
5. Raise the Marketing Bar
Networking used to mean cocktails and handshakes. Now, it is all about immediacy. Give your business an instant presence through online networks including Facebook, Twitter, YouTube, Instagram, and LinkedIn.
Set up group meetings, sales presentations, and special promotions using webinars. Offer tutorials, demos, or new certification sessions as webcasts or podcasts for immediate download. Measure all of your marketing efforts to see which ones are cost-effective. You can do this with a Customer Relationship Management (CRM) software solution linked to your accounts receivable system.
6. Make Everyone a Salesperson
From telephone to email to face-to-face meetings, every employee has the opportunity to spread your company’s message and engage in potential sales-generating behavior. Everyone needs to pitch in to help by cutting costs, selling, networking on the web, marketing, and more.
If you can get your employees invested and motivated to sell your message by encouraging self-development through roundtables, conferences, lunch meetings, and webinars you’ll be well on your way to creating an organization that is built around increasing profits.
Remember, it pays dividends to reward your employees that seek continuing education, or who make an extra effort to represent the company inside and outside of work.
Author: Mitchell York