Everyone wants to be more profitable. After all, profit is how we keep score in business. It’s not about what you make – it is all about what you keep. Sometimes the simplest ideas can help you increase your profits. If you’re ready to jumpstart the money making activities in your enterprise, implement these seven ways to be more profitable in your small business!
- Go through customer files. They are a gold mine.
How many customers are in your database? How many customers are active customers (you’ve done business with them in the past 18 months)? Usually the number of customers in the file is much greater, sometimes exponentially greater, than the number of active customers.
Reactivate your inactive customers. Send a postcard series with the theme “We want you back.” You’ll be surprised at how many call and say, “We thought you went out of business since we hadn’t heard from you in a long time.”
These people have purchased from you at least once. Give them a reason to purchase from you again!
- Know your net profit per hour.
Net profit per hour is total net profit before taxes divided by billable hours or revenue producing hours. Include all employee hours from all employees it took to deliver your products and services. Do not include training hours, vacation hours, etc.
It says for every hour that you produce revenue, what is the bottom line profit that you generate? If the number is lower than you’d like, then take steps to increase it. This might be raising prices, adding additional products and services to increase the total sale to one customer, increasing employee productivity, or cutting overhead. Ask your employees how to decrease costs or increase sales by $100 per month. They can relate to $100 and probably will have some great ideas. Implement them and they will continue to give you great ideas.
- Don’t get stupid when you get busy.
Discipline in busy times as you discipline in slower times. When it is busy you have a tendency to let infractions “slip under the rug” because you don’t make the time to deal with them. The fear is that you can’t afford to be without that person because it is busy. If an employee does a fireable offense, he must be fired. It doesn’t matter what time of year it is.
If you don’t fire that person, your revenues may start to slip. Other employees will see that “someone got away with something” and they will be less likely to work as hard. Less hard work means less revenue. Less revenues usually means less profits.
- Ask for referrals.
One of the best ways to grow your company is through referrals from happy customers. Put a statement at the bottom of your invoices, on proposals, and the back of your business cards.
Print “We grow our company through referrals from satisfied customers. If we provided excellent products and customer service, please tell your friends and colleagues. If we did something wrong, please tell us and we will fix it. Our goal is 100% customer satisfaction.”
This statement lets a customer know that you are serious about providing outstanding customer service and that you appreciate referrals. Some will call you with referrals. Some will let you fix a problem rather than spreading the fact that they were unhappy to friends, neighbors, and social media.
- Call 30 days after you make the sale.
The person who sold the product/project or a customer service representative should call 30 days after the sale to make sure that everything is ok. He should ask for referrals by asking, “Who have you talked to about your new ________?” When the customer answers he says, “Do you think NAME would be as happy as you are with a new _______ like you have?” When the customer says. “Ask NAME.” Get NAME’s contact information and follow up on this referral.
- Save 1% of every dollar that comes in the door.
This is your emergency cash account. For each bank deposit, write a check or transfer 1% of that deposit amount into a savings account when you make the deposit. You still have 99% to use. That 1% will be there when you need cash for payroll or taxes.
- Get timely, accurate financial statements each month.
Reviewing these statements takes less than 30 minutes per month. You will spot minor issues and can take care of them before they become major crises. You will also be able to make great business decisions based on the accurate information you get.
Implement these simple ideas. They can help you generate more profit today in your small business.