During a power-packed Q&A session, Mike Anderson (NSBC Founder & CEO) interviewed Shirley Pearson (ActionCOACH Business & Executive Coach) about what it takes to boost profits and how business owners can zero in on what they need to do now to make this happen. Let’s look at the four key questions to driving profits in your business.
What are the critical drivers to increase sales and drive profits between 46% to 61%?
There is always so much that can be done to increase sales but there is a limit on time, energy and money. People have different ideas of what works and sometimes around a braai we hear of a new idea which will help us succeed and we venture down that route and then we hear another plan and head down that path. Not realising that every time we change plans, we are using up time, energy and money and eventually we run out. But what can you do?
There are four areas which we can home in on. By focusing on these four areas we can get a fantastic knock-on effect.
Critical driver 1: What is your profit margin?
It is important to know that not all the money we receive is profit. We need to extract the maximum profitability out of our sales else why are we in business? Profit is the money left over after you have covered all your expenses.
Critical driver 2: How do you retain a customer?
The nature of the sales game is to get a customer and keep a customer but often entrepreneurs are hyper-focused on getting the customer but they forget about those who are already doing business with them.
The current customers we have already know, like, and trust us. We need to focus on making them raving fans of our brand. We may be satisfying our clients but do we delight them? There is a huge difference between satisfaction and being delighted.
Critical driver 3: What value do the clients bring to your business?
This is measured by how often they are buying from you and how much they are spending. Our regular clients may buy one product or service from us, but are they aware of the full bouquet of offerings you have. This could increase our sales and in turn increase our profits.
Critical driver 4: How many leads can the business get and convert?
Within the digital space, we can create thousands of leads through likes and shares but where are the customers? We need to evaluate what percentage of our leads are converted and if you are generating enough leads. Lead generation costs money and are we getting a good return on our investment.
A question we can ask regarding leads is “Have we got the right leads?” No matter how good you are at sales if the leads you have are wrong you won’t be able to convert them. So we need to be active and have productive conversations with the right people. Are you engaging sufficiently with your target market? One of the downsides of the digital space is that our customers are far away from us. This distance between the lead and your business makes that it takes longer to convert and that you are less likely to make a conversion. The closer the customer is to you and the more directly you engage with your lead the more likely they are to become a customer.
Where do we start now that we know what to focus on?
Let’s take it from the bottom up.
STEP 1: Maximise profits
What you have got in the till, you’ve got in the till but how can you maximise the profit from this?
Consider these three questions:
- What unwanted expenses do we have?
- Have we negotiated the best prices with our suppliers?
- Are you offering a fair value for your product?
It’s important to review your expenses and see how you can get a tighter rein on them. You should also ensure you are charging a fair value for the product or service you are selling. Look at what competitors in your market are charging and ensure that the price point you offer your clients is competitive and fair. This is often where business owners struggle as they either under- or overvalue their offering.
STEP 2: Retain clients
Are you moving on to new and shinier clients after you have onboarded your current client? We need to maximise the value we give our clients so that they can maximise their spend with us. We need to look at the average rand sale per customer and how often they are spending with us. Do they know all the products and services we offer? Are you delighting them so they keep coming back for more?
You need to look at your position in the market. Talk to your regular clients and find out what is working in your offering, and what other items they would like you to offer. With this information, you can focus on the items which are in line with your overall offering, and get your customers to buy more from you. If you work in retail, you can offer bundles to clients. For most businesses, you can look at how you can upsell to your customers too. Remember when you do decide to upsell, there are three areas to focus on:
- Be clear about what you are upselling.
- Design scripts and processes on how you are going to upsell an item.
- Test and measure your upsells.
How are you talking to your customers? Keep in contact with your clients. When you reach out to your customers whether by phone call or email make sure that you add value. Don’t send a spam newsletter every month, but rather think of some interesting pieces of information you can share with your clients. By keeping the communication lines open and adding value, you can help to increase the sales in your business.
STEP 3: Generate leads
Remember that generating and converting leads cost you in time, energy, and money. This is why you don’t want to lose your customers after you have got them. By ensuring that you are retaining clients well, you can budget the right amount into your lead generation because you know what the client is worth to you.
How often do you follow up on quotes? It is common for people to give up after three times but statistics show that you need to follow up at least eight times before people are willing to do business with you.
Some lead generation strategies you can look at are:
- Sales representatives: How many sales reps do you have? Are they achieving their targets? What can you do to help them achieve their goals?
- Company alliances: What businesses are there in your industry that you don’t compete with and that you can network with. This can have a reciprocal benefit as you benefit from their client base and they can tap into your client base.
- Digital space: Depending on the business you are in, the digital space can be lucrative. If you are a B2B business, you may not gain many leads from the digital space but wedding, team building and beauty benefit a lot from using Instagram.
How do you know what you should invest in sales and marketing?
This brings us back to the idea of what is your average client worth? If your sales are evenly spread between your highest value offering and your lower value offering then it would be good to take an average. If there is a big gap between some high-priced products and some low-priced products then you may want to work out the worth for each group.
When working out the worth of a customer, you need to look at their value per transaction as well as their lifetime value. You also need to know what the average rand value of a sale is. By knowing these numbers you can assign an amount for how much you should spend on acquiring a customer. Remember you are essentially “buying” a client when you spend money on sales and marketing.
When we spend money on marketing we are concerned about the return on investment and you should aim to break even after a month or two.
At the end of it all, it is important to be consistent and have a working plan in place that you execute every day. Start with one small step and do it consistently adding on more after you have mastered the first step you want to take. Which step will you take today?
To learn more about this topic, watch the interview here.
ActionCOACH is a proud Partner of the NSBC