No matter your industry, mission, products and services, or the people you serve, every business likes to make money. Especially as the economy is recovering as the COVID-19 pandemic winds down, now is the time to dust yourself off and get back on your feet.
When it comes to maximizing your earning potential, there are two main ways to accomplish this: by increasing your revenue coming in and by decreasing the money going out. What is left is profit you can reinvest on catalyzing this cycle, in turn boosting your earnings further. But where to begin? Let us take a look at a few worthwhile strategies that you can start implementing today.
Increase Your Revenue
The following are a few tried-and-true methods to attract business and the extra income that comes with it.
Convert New Customers to Returning Customers
While it goes without saying that winning over new customers is the most obvious way to increase revenue, getting them to come back is an investment that yields plenty of dividends. Consider a few of these highlights about the value of return customers:
- 61% of small- and medium-sized businesses attribute more than half of their revenue to repeat customers.
- On average, return customers are worth up to 10x as much as their initial purchase.
- A 5% increase in customer retention can increase a company’s profitability by 75%.
- Conversely, reducing customer defection by 5% can increase profitability by 25-125%.
- 89% of customers begin business with a competitor following poor customer service.
- 82% of companies agree that retention is cheaper than acquisition.
- The average return customer spends 67% more in 31-36 months with a business than 0-6 months.
Though all of these points speak to how customer retention can be a massive boon to your bottom line, it is that last point that drives home the fact that retention is a long-term investment. Indeed, in order to keep your customers, your business needs to focus on stellar customer service and quality products that keep them satisfied. By doing this consistently over time, you build a relationship with your customers and clients who, when happy, will reward you with loyalty by coming back. And if you do an exceptional job, these same people will tell their friends to check your business out as well.
Incentivize Referrals Through an Affiliate Sales Program
If your return customers become loyal fans of your business, their referrals can help propel your company even further. According to recent statistics, when it comes to word-of-mouth, 92% of consumers trust referrals from people they know. Those referred by a friend are four times more likely to buy and have a 37% higher retention rate than brand new customers.
While your business has done well to make these people so happy that they will tell their friends, you can encourage them to continue to do so by offering rewards or affiliate sales programs. You can do this by:
- Creating a referral program that credits referrers with discounts, perks, or points in exchange for referrals.
- Setting up an affiliate program where affiliates can share a link with a specialized code that credits them with a small percentage of the sale.
Increase Your Average Order Value by Upselling and Cross-Selling Your Products
Average order value (AOV) is a great metric to determine sales and order performance. As long as that number is ticking up alongside the quantity of orders, your business’s revenue will continue to grow. You can boost AOV by upselling (recommending a higher priced option) or cross-selling (offering them additional options) to your customers.
An example of an upsell would be offering three service tiers of $9.99/month, $14.99/month, and $24.99/month and highlighting the second option. By doing so, it not only demonstrates saving money compared to the most expensive option but it also demonstrates having more value than the cheapest option.
An example of a cross-sell would be bundling outfits together: the customer has a shirt and pants in their cart and a recommendation could be a few different pairs of shoes. Some websites use algorithms to determine cross-sells such as “others who bought product X also bought product Y.”
By finding ways to include upsells and cross-sells into customer orders while still providing value to them, you will boost your AOV and, in turn, earnings.
Continue Marketing Your Business
When things are going well, it is easy to get complacent and enjoy the ride. Resist that temptation and instead continue to build your momentum. While you should find ways to add new marketing campaigns, you can also adjust existing ones. A few ways you can do that is by expanding to a new social media platform (or get rid of those that are not performing as well) or collaborating with other businesses whose products and services complement your own.
Stay ahead of the game, read through reviews and customer satisfaction surveys to identify needs that are not being met. If the sailing is smooth, use this time to plot your next course of action while getting rid of anything that hinders your business on that journey.
Which brings us to our next section…
Reduce Your Expenses
To avoid expenses creeping up alongside your booming sales, make sure to manage your cash flow effectively. These are a few strategies to help keep your costs down without cutting into service or product quality or customer and employee satisfaction.
Remove Low Performing Products and Services
Especially if you operate in a cyclical industry, customers are always craving the latest and greatest thing to hit the market. While some products and services remain valuable for a long time, the demand for others might fade away — if there were really any sales for them at all. With that in mind, it is important to prune your offerings and get rid of the products and services that perform poorly.
If these products or services are becoming unprofitable or taking up physical inventory space (which, in turn, costs money), sometimes it is better to sell them off at a sale to make room for better products. Though clearances of unpopular products might be a short-term loss, the money saved on inventory space along with the opportunities to cross-sell and market sales events can help turn those expenses around. As for the long-term, by getting rid of the least-valuable products and services, you can focus more on what your customers like, increasing their satisfaction which, in turn, increases earning potential.
Minimize Non-Essential Tasks by Removing or Delegating Them
For a lot of people, it is easy to confuse being busy with being productive. Especially if you are a small business owner, getting overwhelmed seems to be part of the job description. Take some time to organize yourself and reflect on what tasks are important and necessary and stop focusing on what is not important nor necessary.
But what about tasks that are important to the business’s health but distract you from profit-generating work that you are best suited for? Delegate these tasks to experts who can help share the burden. This will make sure the task gets done well — or perhaps even better than what you could do on your own — and lets you focus on more important matters only you can do.
After all, money can always be made but there is only so much time to go around.
Streamline Management and Operations Costs
In that same vein, make sure you avoid bloated operations costs by analyzing how efficient your company and its processes are. How many new customers or sales leads have been generated by your employees? How efficiently can you produce or sell your goods? If you can find ways to save money and time by cutting down on resource usage or switching out to more effective processes, you will not only save money on mitigating waste but make more money on increased productivity.
Similarly, by finding ways to improve your workers’ processes so they are not overworked or stuck with meaningless busywork, you will improve their satisfaction which helps boost productivity as well. Of course, if there are a few employees that are causing trouble, do not be afraid to let them go and find people to do a better job. You can also hire contractors to take care of short-term projects or specialized tasks instead of creating another full-time position that only has part-time levels of work.
Improve Your Purchasing Practices
Especially if you rely on wholesalers and suppliers, be sure to evaluate your purchasing practices and renegotiate as needed. With factors like inflation, logistics costs, demand, and others, make sure you are finding the best suppliers with the best prices without sacrificing quality.
Beyond just finding new wholesalers to work with, however, you can make the most out of existing relationships in the following ways:
- Increase your order quantities which are often at a lower per-unit cost. Provided you have the inventory space and can still sell enough of the product in question, a lower per-unit cost helps boost your profit margin over time on that product.
- Ask your vendor about discounts or any other offers. Even wholesalers have sales too.
- Try to negotiate better deals for long-standing relationships. If you are one of their best customers, the supplier might be interested in giving you a better offer to retain your business.
Another option is to support your local or regional community rather than relying on a national chain. While there is nothing wrong with going with bigger companies, logistics costs of shipping goods across the country are naturally much higher than getting the same goods from down the street. Not only does this help keep costs down, but by working with your business neighbors, they might in turn support your business in other ways, whether it be referrals, discounts, or other perks.