From the blog 5 Things You Can Do Right Now to Increase Your Profit Margin
Starting a business is scary. Keeping it alive is just plain hard.
Only 50% of SMBs make it past year five. That’s literally a coin toss. But you don’t have to leave your livelihood up to chance.
Don’t leave your livelihood up to a coin toss. Take charge of the bottom line.
Business owners can control their profit margin as easily as what they eat for breakfast. But maximizing profit takes more than turning the lights off after close.
We’ve evaluated 5 unconventional ways to increase SMB profit margins. The techniques are simple to understand. And you can start implementing any of them within the next five minutes.
Learn the art of the tactful sale
Lazy salesmanship won’t benefit your profit margin. But aggressive associates can turn customers away for good.
Balancing passive and aggressive sales methods will maximize sales floor profits. It’s called a “tactful sales” strategy and looks different for every SMB. But they’re all about helpfulness and casual enthusiasm.
If you’re having trouble defining a tactful sales sweet spot, consider your current sales script. Does it come across as bullying or encourage employees to make typical mistakes? If so, try changing things up.
This approach isn’t just a better way to upsell. Tactful sales improve customer service and inspire customer loyalty.
Keep your employees excited
While we’re talking about loyalty, employees who don’t care about work usually don’t stay employed. But investment is a two-way street. If your company cares about its staff, they’ll protect your bottom line down the road.
You want loyal employees, and you can inspire loyalty in several ways.
- Tactful sales strategies demonstrate selflessness. It’s a unique quality to have in small business marketing and makes employees feel as good as customers.
- Review the company’s employee benefits. Are there unique perks you could offer outside of insurance coverage or bonuses?
- Finally, consider employee training. It’s a new hire’s first impression of their employer’s day-to-day, so it deserves fine-tuning. Ask yourself if you’d sit through your company’s onboarding program. (Be honest!)
If training sounds less than tantalizing, consider using quick-fire employee training techniques. The idea is to reduce boredom, improve learning, respect your employees’ time, and get on their good side from the start.
Endearing employees to you is more than its own reward. Happy staff will freely share their job satisfaction with store visitors.
Happy employees are loyal employees. Their security is worth its weight in gold.
Manage your customer catalog and inventory
If your customers are happy, great. But don’t take them for granted.
The Pareto Principle suggests that only 20% of buyers will provide 80% of profits. You should absolutely cater to your 20%.
Apart from stellar service, satisfying the 20% involves considering new ways to meet their needs. Don’t be afraid to dive into the numbers here. Who exactly are your best customers? What do they buy most? Is there low-success inventory that isn’t worth keeping in stock?
Depending on the situation, an SMB might decide to diversify their product line. For example, you might start cross-selling products to compliment top-selling services. You might even stop offering low-return products entirely.
Either approach is a logical way to boost profit.
If this seems overwhelming, don’t fret. There are affordable, advanced inventory management systems out there that track sales and stock. They provide real-time updates on how to easily stretch your dollar.
20% of buyers will provide 80% of profits.
Analyze your accounting methods
When most businesses think of maximizing profit, they think about affordable expenses. But there’s a more sensible way to increase profit than squeezing your operations budget.
The Profit First approach, developed by Mike Michalowicz, is a great place to start. He encourages taking a profit percentage out of every deposit before paying business expenses.
Once your business makes its money, what’s left of the deposit acts as a working budget.
SMBs should also consider activity-based costing. It’s a type of accounting that determines whether every expense provides a benefit worth the cost.
Start logging your daily, weekly, and monthly expenses without changing your spending habits. Once you categorize each expense, evaluate its worth to your business. Only cut what you have to.
Selective cuts will save you stress while still getting the profit you set out to earn.
“By taking my profit first, from every deposit, profit is now a habit, not a hopeful ‘one day’ event,” – Mike Michalowicz
Selectively stretch resources
As you evaluate costs, remember the goal is to be intelligently frugal, not miserly.
The keyword here is creativity. Sure, you can give your employees an office supplies budget. But have you considered going paperless in both the front- and back-of-house? You have loans to pay. But can you negotiate a lower rate for an extended contract?
Business owners may never know what they can save money on because they forget to ask.
And you have resources that aren’t financial in nature. For instance, consider your building space. Can you refresh your visual merchandising to attract more customers and take up less space? Can you sublet that oddly placed back room or let a night chef use the kitchen?
Getting inventive with company resources can increase an SMB’s profits in unusual, exciting ways.
Bringing it all together
Let’s consider all the profitable methods we discussed today.
- Keep the sales floor healthy with a tailor-made, tactful sales strategy.
- Inspire staff loyalty with ethical practices and quick-fire training.
- Encourage preferred customers to spend with a thoughtfully planned, well-maintained inventory.
- Treat yourself to well-earned profits before analyzing the budget with activity-based costing.
- Think outside the box to strengthen your bottom line with various types of resources.
Regularly incorporate these 5 methods into your day to day operations. You can start increasing your profits today.