Improving Business Profitability
Gearing Up For Growth – Improving Profitability In Your Business
Have you been thinking that it’s time to take your business to the next level? Or are you concerned about growth targets that just aren’t being met? When business owners consider growing their business, thoughts immediately turn to revenue and ways to get more sales.
But, increasing revenue isn’t the only way to grow. You can improve profitability by reviewing a range of key business drivers and finding ways to make them work better for you.
Take a look at the key areas we’ve identified where you can get the most bang for your buck.
1. Know Your Client – Create the Right Mix of Clients to Improve Profitability
There is a perfect client for every business. But we all know that most businesses will have a mix of different types of clients. There are ones who are highly profitability through to ones where inefficiencies in meeting their request makes them less profitable. By knowing your client base and using data to segment them – you will gain greater insight into the type of client you should be targeting.
Imagine if you could attract even more of the clients that improve your profitability. It’s about exchanging the lower value clients for a higher value one. It could mean changing the way you communicate the value you deliver to the client. Or the way you market your product or service to make it more attractive to your ideal client. It also allows you to be selective when considering a new client. Some clients can cost you more money to take care of them, than the revenue they provide.
2. Increase Repeat Business or Revenue per Transaction
Retaining an existing client, costs less than acquiring a new one. Considering that existing clients have already experienced the value you deliver and are therefore more likely to repurchase, it’s important to see what improvements you can make to encourage existing clients to repurchase. The benefit with existing customers is that you have already done the hard yards in gaining their trust and building a relationship. If they had a good experience buying from you, it’s highly likely they will buy from you again. You will still need to market to them, but it will be more cost-effective than the methods you would use for gaining new clients.
Another way to leverage the relationship you have with existing clients is to consider whether all their needs have been met. They may have purchased a particular product from you in the past but may not be aware of other product offerings or new products you might have launched. Knowing your customers will help to communicate messages that your audience values. Created a more targeted personal message.
Is there something within your product or service mix that will solve a problem for them? Let them know. By looking after clients in this way, it also helps to keep them loyal to your business.
3. Know Your Value And Use this to Make Adjustments in Your Pricing
It’s a common trait for businesses to set pricing that reflects their status as a start-up when they first launch their business. But many businesses forget to review this pricing as they become more proficient in their industry. Have you thought recently about the value you bring to your clients with your product or service? A strategic review of your pricing should be conducted regularly to ensure you’re capturing the value in your product or service as well as your underlying operating costs. The right client for your business (identified in the point above) will know your worth and the value you bring to them – making them more likely to absorb changes in your pricing.
4. Improve Business Processes for a Positive Impact on your Bottom Line
By reviewing and improving business processes, you can increase your profit margin without needing to pound the pavement to get more clients. Improvements can lead to greater efficiency in providing your product or service while still operating at a high standard. As well as improving the experience the client has when dealing with you. Involve your team in reviewing the systems and workplace processes across your business. Efficiencies mean less waste in money, materials and hours spent delivering your product or service. And improving the client experience will improve the chances of being referred to more clients. Creating organic growth for your business.
5. Failing to Set the Right Targets could Reduce your Profitability
Tweaking the right business drivers can have a significant impact on profitability. But so can making adjustments to the wrong drivers. It’s important to have a planned and measured approach before making any changes so you can see what effect specific actions will have on your business. Engage the help of a qualified business advisor to ensure you’re making the right decisions on your path to improving profitability as rapid growth that is not managed correctly can also have a detrimental effect on your business as well.
We use a triple-pronged approach to increasing profitability. Learn to plan, measure and manage your key business drivers. Talk to a Modoras Business Adviser today on 1300 888 803 or book an appointment online.
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