Small business owners need to change their practices to focus more on profit. It was estimated that nearly 67% of small businesses either didn’t make a profit in 2018 or failed to increase their profit from the year before.
Here are a few ways in which small business owners can follow to cut costs, increase profits and improve their bottom lines:
1. Change Operating Procedures
Your business needs to generate more sales while reducing expenses. To increase sales, businesses could try cross-selling—offering new services or goods that complement their current offerings. Businesses can also switch to a relationship-based sales model that gets customers coming back to them—offering monthly or yearly service plans, or a bundle of visits at a discounted price. Another operational change that can increase profits is incentivizing new customers to try your product with specials deals, discounts, or short-term giveaways.
Equally, small businesses can try to trim expenses by auditing their administrative functions. Management can establish whether their routine tasks that they could afford to outsource or eliminate to save money or whether it would 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
Accreditation, licenses, and certification for the business or employees can set a small business apart from its competition. Utilise the brand’s reputation online, social media, business website, and a blog to connect with clients and make strategic alliances.
Use advertisement sharing with complementary businesses as this can help to find ways of leveraging referral selling and taking advantage of affiliate marketing tools to drive new customers to the business’s website. Eliminate stale, ineffective alliances that may be dragging your business down.
3. 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, businesses need to be automated.
Create a system for employees to access and add data, keep all information updated and synchronised, and be sure to build in back-office administrative time into project fees, hourly rates, or ongoing charges. Automation will allow businesses to run smoothly and help a scaled-down workforce accomplish more back-office work.
4. 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 R700 per hour for a full day, tweak the offering and give them a discounted 20-hour retainer plan at R550 per hour. While the hourly rate would be less in this case, the business will be billing for a greater total amount and locking the client into a longer-term arrangement.
This approach 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.
5. Raise the Marketing Bar
Marketing is all about immediacy. Give your business an instant presence through operational and social networks including Facebook, Twitter, YouTube, 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 marketing efforts to see which ones are cost-effective. Small businesses can do this with a Customer Relationship Management (CRM) software solution linked to business accounts receivable system.
6. Make Everyone a Salesperson
From telephone to email to face-to-face meetings, every employee can and should spread the brand’s message and engage in potential sales-generating behaviour. Everyone needs to pitch in to help, whether it be by cutting costs, selling, networking on a digital platform, marketing, and more.
If business owners can get their employees invested and motivated to sell their message by encouraging self-development and creating an accommodative organisational culture, then the business will fundamentally be built around increasing profits.
Remember, it pays to reward employees that seek continuing education, or who make an extra effort to represent the company inside and outside of work.