One of the most common complaints I hear from business owners is that they are working harder and making less. When I question them, they often tell me that they've increased their sales but are still making less money.
Without even looking at their books or asking them any more questions, I know what the problem is—their gross profit margins are dropping.
Sadly, few business owners figure out what is happening because they are focusing on sales, not profits! The key is to improve profits before increasing sales. Once you have improved your margins, any increase in sales will increase profits.
I use the following list of 8 secrets with my coaching clients so that they can experience some quick success in increasing their profits without spending a fortune on marketing and advertising. Once you have some success you will be much more motivated to continue the hard work of continuously improving your business.
These 8 secrets are designed to result in a rapid and dramatic increase in profits:
1) Increase Prices. The decision to raise prices is a very tough one for most business owners. Most business owners shy away from any price increases until they are forced to increase them.
But my experience coaching many companies in various industries is that most businesses are charging less than they could and should. This directly affects their customers, employees, and profits.
Once you decide to increase your prices, how you increase prices can have a tremendous effect on both your cash and your bottom-line profits. Two companies in the same industry raising prices at the same time can experience tremendously different results.
Adjusting your prices requires you to consider the timing and how your customers perceive the value of your products or services. Here are some things to consider.
1. Decide if you should raise your prices.
2. Clarify your reasons for the price increase.
3. Determine the amount of the increase.
4. Consider the ramifications, both pro and con, of raising your prices.
5. Planning the price increase.
6. Announcing the price increase.
2) Improve Gross Profits. The number one question I hear from new consulting clients is, “How can I increase sales?” I always ask, “Why do you want to increase sales?” They usually look at me like I just added a third eye in the middle of my forehead. But when I push them, they finally get to the fact that they want to grow their business, make more money, and get more cash in their bank account.
Now I can get them to understand that what they really want is an increase in profits.
But their question shows that most business owners think that increasing sales is the quickest way to increase profits. But is it?
Yes, increasing sales is important. We put a complete Marketing and Sales Boot Camp together to help small business owners grow sales without spending a lot of money on advertising. But it takes an investment of time, energy, and money to see results.
Improving gross profits is something the business owner can often easily accomplish without a large investment of time or money. In fact, it is usually the quickest way to increase profits and cash in the bank.
That is why you should work on improving gross profits before you work on increasing sales. Then the increase in sales will produce a much larger increase in profits and cash flow.
3) Market Your Cash Cows. Before you can do this, you must know exactly what it costs you to market, produce, and deliver your products to your customers. So roll up your sleeves, dig out the data, and calculate exactly what your profit margins are on each of your major products. Hire a good CPA to help you the first time if you don’t know how. But do the work.
Calculating your margins is one of the most important things a business owner can do. Doing so gives you the information you need to focus on marketing and selling the most profitable products.
4) Create Bundles and Widgets. Bundling is a great way to increase sales to current customers by combining your products or services in a way that solves a majority of your customers’ problems. The goal is to be a one-stop shop that allows them to get everything they need from you.
First, look at current products you could naturally bundle. Common examples are:
o Car washes that sell multi-wash or family passes at a lower price.
o Furniture stores that sell cleaning products, pillows, and linens.
o Electronics stores that offer warranties with everything.
o Fast food restaurants and their combo deals.
o Our CPA firm that offers business owners many services combined at a discount.