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Site Name Top Bonus Year Founded
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Effective Strategies To Enhance Small Business Profitability

Live Plan
Chidiogo Akaelu
21st February 2022
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3 min read

 

Running a small business is an adventure with its own set of challenges. Small business owners are frequently in desperate need of strategies to increase business profitability, as sales alone do not indicate business success. As perplexing as that may sound, here’s the point: increasing sales leads to increased yearly total profit, but if you’re not careful, the cost of increased sales may have a negative impact on profit margins and cause loss.

Read more about Business

Raising prices is not the first course of action when it comes to increasing profitability for small businesses. This is because the company hasn’t established a stellar reputation and hasn’t thoroughly penetrated its target markets. Unless, of course, prices are significantly lower than those of competitors, in which case an increase can be considered.

As Simon the author of the book, “Six steps to creating profit” rightly noted, nearly two-thirds of small businesses either don’t make a profit or fail to increase their profits from the year before. The question now is, how can small businesses fatten up their profits? 

Here are the strategies which small businesses seek. 

  • Retain Existing Customers: This strategy is old but golden. It costs little or nothing to retain existing customers as it costs to attract a new customer. This invariably means that the marketing efforts you channel towards existing customers yield more return on investment (ROI). Engaging existing customers entails keeping in touch with them, gathering customer data, planning special events giving discounts, and more to keep your customers satisfied and keep them coming back for more. 
  • Attract New leads: Small business owners need to leverage information marketing to generate new leads for the business. Customers of today are hungry for information as a result of the desire to educate themselves before they make purchases. Therefore, making this information available to them will help you capture their attention, contact information and ultimately lure them into making purchases. In as much as posting information on social media platforms are helpful, using lead magnets will help you to acquire prospective customers’ contact information. Bear in mind that this information doesn’t have to be lengthy and should be promoted with an attention-grabbing headline with a call to action. 

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  • Follow-up Leads: Getting prospective leads is one thing, but the most profitable thing is following up these leads effectively. Prospective customers are individuals who are still researching their intended purchase or those who want to buy but are being distracted by one or two factors. Ignoring them would be playing a huge gamble of losing them to competitors. To increase your business profits, you have to deliberately come up with planned ways to follow-up leads, and the approaches on how to handle them.
  • Consider Adding New Products or Services: If your customers are oftentimes in need of products or services related to what you’re selling then you might consider offering those products. However, don’t do this blindly. To achieve great results with this, you have to conduct market research to find out how extensive the needs are to avoid stocking up on goods only requested by one or two persons. You can also ask existing customers what type of product or service they expect to see.
  • Expand Order Size: If you have 200 customers spending $60 within a month, you’ll have $12,000 but if the same 200 customers spend $80 within a month you’ll have $16,000. That’s a calculative way to Increase Profitability and to get order size to increase, you have to learn to upsell and cross-sell. For instance, A gym instructor can be a reseller for nutritional supplements.
  • Cut Expenses: Bearing in mind that profitability is a measure of gross and net margins you have to strive to reduce expenses as that will invariably increase the net margin. You can reduce expenses by reducing staff or staff hours, spending less on supplies, switching to a cost-effective supplier, etc.

Never forget that the process of hiring and training new employees is both time and money consuming therefore always strive to keep your employees happy and motivated. A happy employee makes for a satisfied customer. 

Featured Image Source: Live Plan

Got something you want to read about on our platform? Contact us: editor@connectnigeria.com

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