4 Ways to Improve Your Profit
The four ways to improve your profits are (on the face of it) deceptively simple. At Batterham & Associates we can teach you how to implement these strategies and get the most from them.
1. Increase The Transaction Value Or "Average Sale"
The first way to grow your business is a Blinding Flash of the Obvious or BFO! There are two fundamental ways to increase the average sale.
First, by up-selling and encouraging the customer to buy more.
Second, by raising your prices. When you suggest this to the average business person they think you're some kind of nut. But we'll guide you through what we call "The Margin Chart". It shows the direct relationship between 4 key variables in your business - price, volume, variable costs and fixed costs.
2. Increase The Number Of Customers (Of The Type You Want To Have)
Like way 1, way 2 is a BFO. But few businesses realise its importance. The essential key part of way 2 is ‘of the type you want to have.’
Many businesses, maybe yours, are trying to be all things to all people. They discount. They get trapped in price wars. They do not deliver value. They have not identified which sort of customers they should be targeting. They are just focused on making sales.
Let's go further. Like everyone you will have heard the phrase "The Customer Is Always Right." We think this needs modifying. We believe it should be:
"The RIGHT Customer Is Always Right"
Most businesses do not have the customers they want and so they operate on the lowest common denominator. It ruins their businesses. We can work with you to identify and target the customers you want and then help you go about getting them.
3. Increase The Transaction Frequency
This third way could be considered to be the most important of all. It refers to loyalty, or customer retention, which is closely related to value. Frederick Reichheld in his book, The Loyalty Effect discovered that a 5% increase in retention (of the right customers) could produce as much as a 125% increase in profit.
He didn't say a $5,000 (or $50,000) investment in marketing could produce an increase of 125% in profits. He said a 5% increase in RETENTION of the RIGHT customers.
And the way you affect loyalty is by delivering value and at Batterham Associates we can show you how to develop customer targeting and retention strategies. Contact our professional team today for a quote for a tailored package of services for your business!
4. Increase The Effectiveness Of Each PROCESS In Your Business
The fourth way to improve your profits is about increasing effectiveness. It’s central to everything but few people work at it. Most people don't see their businesses as a series of processes. But that's exactly what they are. Here’s an example that illustrates how examining and changing processes can have a massive impact:
The client is a Farmer, located out of town, 85% of business comes from people phoning to check prices. After reviewing farm statistics, it was established that when people visited the farm, 85% of them bought. Whereas only 22% of those who called on the phone actually came out. So the key activity (or process) that needed to change was, of course, the way the phone call was handled.
You might ask, how could an Accountant help with that? But we have the knowledge, expertise and resources to help you with these types of problems. The results were instant. The phone conversion rate shot up to 60% and now nearly three times more people visit the Farm, helping the client multiply this part of his business by nearly 3 times.
We urge you to get in touch, so we can help you implement these four simple strategies and start making the most out of your business.