Do you feel like your business results are slipping?
Well the first step is probably to eliminate the “feeling” element from the equation. Preparing and reviewing financial statements as well as key performance indicators on a regular basis will give you the information required to determine where your bottom line is at. You will have a handle on both sales and operating expenses. Once you can identify where the cracks are appearing you are then in a position to implement strategies to rectify the issues. Sales data should be available at least on a weekly frequency and a set of accurate financial statements should be able to be produced within a week of the end of month.
- Create value added offers
This can be done simply by putting products or services together in a single attractive package. For example you can provide a gift ot bonus with certain purchases. A client of mine has achieved this by by developing a “bundle” offer where the customer buys 3 items instead of 1. This not only creates a high perceived value for the customer but also increases the average sales transaction.
- Encourage companion selling and upselling by your sales team
Companion selling is selling products or services from your range in addition to the original purchase which will complement the purchase. Ask yourself, “what else could we offer with this item that would add value or help the customer get the most out of their purchase”. I know that I love my Weber Q with matching cover, gas bottle and cleaning brush!
By upselling we mean encouraging the customer to move from purchasing a lower end product to a higher end one. You will will find this when you go to by a car for instance. You will have the base model which will be the price leader by you but you will soon find plenty of ways to spend more by choosing higher on the model offering.
- Work on your margins and pricing
The bottom line here is that you don’t want to chase just any sale you want to chase profitable sales. So number one you need to have a firm understanding of your margins and how they affect your profit line. Make sure that your prices are where they should be, in line with market forces and margin expectations and avoid discouting and price wars.
- Focus on boosting profitability
To maximise profit you need to focus on sales that give you the highest gross margins. As with point 3 above, you need to understand your margins so that you know what your most profitable lines are and where you can get the greatest contribution to profit.
- Products and Customers
You need to understand the profit contributions of each of your products and your main customers. Buy understanding this you can focus your efforts and indentify opportunities for improvement. Moving your products with the healthiest margins to your premium customers will be the fastest and easiest way to boost profits.
- Avoid Discounting
Don’t discount on lower margin products or services and where possible avoid discounting altogether. If discounting is the only way of being competitive with the market ensure that you can achieve the same or better dollar margin after giving the discount. That is, the increase in sales at the lower percentage margin will need to bring in the same dollar result.
- Controlling Costs
This is an element that cannot be ignored. Costs need to be controlled consistent with the needs of the business. Don’t just cut costs but be mindful of things that keep the business vibrant such as marketing and people. Longer term and recurring savings are better than short term slashing.
The important things to remember in enhancing your business is to firstly adopt a risk management mindset, secondly understand your customers, thirdly measure everything that you can, and finally take action based on this information to ensure that your strategies are implemented with purpose.
About the author:
Richard Coumans is an experienced Business Coach specialising in growing and drastically improving the profitability of entrepreneurial privately owned businesses. My skill set gives me an amazing understanding of how the numbers link to the business strategy and the practical experience to develop and implement strategy to maximize those numbers.
m. 0412 119 232