Is It Time To Increase Your Profits? Here is How!
Do you own a small business? Are you making a good profit? Would you like to maximize profit and increase your opportunities for making more money? I decided to write this article since many of the business owners I speak with are focused solely on getting more leads and closing more sales. When I ask them to give me the profitability numbers many of them look at me with no idea how to respond.
As a business strategist, that concerns me. You can’t run a successful business without knowing your profit numbers and my goal is to help business owners make more profits while creating a business that can run on autopilot. As you read this article look for the areas in your business that you can improve profitability in. I will give you tips, tools, strategies, and techniques and even share a few client family member case studies. I will conclude with an action plan, as well.
Let’s dive into how to maximize profit with this article. It is time to look at how to have a lot of profits even during times of slower sales. In fact, let’s take the focus off of sales and keep our eyes on profitability. Why? I find many of my client family members are focused on sales and bringing in more clients, patients or customers and report the same thing that one of my new client family members recently said to me, “Our company increased its sales but decreased profitability”. That clearly is not a good strategy to have a thriving business.
Where is your business right now? Are you where you need and want to be in terms of profits? Get ready to transform your profits now!
Let’s begin our discussion with the profitability definition. Profits are financial gains that a business makes when there is greater revenue to the business than expenses the business is paying out. Profit is calculated as total revenue minus total expenses.
When a business owner is focused on sales, sales, sales without looking at the profits of the company, expenses can run high and profits can be low and the business may actually fail.
I am embarrassed to say that the first time I had a million dollar revenue year in my business I had the lowest profits of my business. Why? I was looking at sales only and expenses were out of control. That was one heck of a lesson to learn!
After that, I have focused on profits and not on sales and kept expenses low and put my energy on serving my client family members.
Think about this. If you have revenue of $100,000 and it cost you $50,000 to get that revenue you only make $50,000. What if you have revenue of $100,00 and increase your profitability and don’t have to hunt for more clients, customers or patients? Instead of the $50,000 in profits you keep $70,000 in profits. That is a game changer, yes? That is exactly what I will show you how to do in this article.
I know the question that many of my client family members ask and so you might also have this question in your mind…
What If Sales Are Slow?
I realize that business is cyclical. Sometimes you might have high sales and other times sales might be slower, no matter what business you are in. This is just part of the cycle of business. I urge you not to panic if your sales are slow right now. I will show you that you can still make a profit as you work to grow your prospects and close more sales and embrace new client family members.
Keep in mind that a successful and sustainable business is a profitable business. If you aren’t able to make a profit, you won’t be in business long-term. Think about this. Let’s say I had revenue of $300,000 a year and with sales and marketing and operations and delivery of the products/services it cost me $240,000 to run the business. That would not be sustainable profits. And believe me, this is an actual example from a business owner I recently spoke with and it representative of many businesses.
I am not here to help you only create a business that has more sales – I am here to help you create a business that has more profits. So even if/when sales might be slower you can increase the profits of your company without making more sales. And this is what most business owners miss and why many fail and go out of business. They keep trying to bring in more clients, customers or patients and don’t have a clue what their profit margin is. Instead, they keep spending money to bring more people in and to deliver more products/services without an idea of how much money they are actually keeping.
I have been helping business owners shift their focus to profits and long-term business success for over two decades. I will share a few of my client family members case studies to help you and to give you ideas that can transform your bottom line profits.
Case Study In The Coaching Industry
This client family member came to me with slow sales and very few qualified leads. She is a career transition coach and wasn’t making a living. She told me leads weren’t coming in and her profits were awful. She asked me if she should lower her coaching fees.
My advice? Get ready for what I told her! I told my client family member to raise her prices immediately. She was shocked. Are you? I explained to her that a small (even a one percent increase in price) would raise her operating profits by 11 percent while her fixed expenses remained the same.
She bought that and then told me she was very concerned that if she raised her prices people would not hire her. I explained that lower-priced coaching got lower quality people who were not committed to achieving results and high-ticket coaching would bring serious people ready to actually do the work with her to get results and that there were more serious people than semi-serious. I also told her that 11% would be a huge increase to her bottom line with only a 1% increase and that no one would say “no” because she was priced 1% higher than she is now. I also told her committed clients to take action, get results, are thrilled when they get the outcomes they paid for and typically shared their results and referred other people to a business. Someone who wasn’t making a big investment usually wasn’t that serious, didn’t get the results they wanted and would actually tell people to avoid investing in her services.
At first, she lacked the confidence to believe in a price increase and then I reminded her she hired me to create a more profitable business and that I had done this with over 5,000 client family members before her. She agreed. We co-created a high-ticket signature program as well as raising fees for current client family members a mere 1%. Her new program was offered at $3,000 per person and we closed 4 people into that program fast so she had $12,000 come rolling in. From the price increase with her current client family members, she added $8,000 as well. So, within less than 4 weeks, I found her $11,000. She now agrees, pricing improvements are the answer to profitability!
Profitability is impacted when you create a price increase. Look at Amazon. Amazon raised the subscription price of Amazon Prime from $79 to $99 and lost less than 5% of their customers. At the same time, they gained $400 million in income!
Case Study Information Marketing Business
I work with clients in every industry you can imagine. I hear similar stories and notice similar concerns and blocks. This client family member came to me with a lot of online products and educational services. He was charging high-ticket for his big on-line membership site filled with high value. He often reduced that price and added in massive bonuses because these were his “special” customers.
His customers who purchased smaller ticket offerings were not given discounts or bonuses. I suggested he take really good care of his smaller customers because if they also got bonuses and discounts he might add hundreds or thousands of customers and that could increase his profits fast.
We emailed all his smaller customers to grab a discount and bonuses on their next (also small) purchase. He added a few thousand dollars of profits ($10k) from the one mailing!
Case Study In The Health And Wellness Industry
A client family member who sells vitamins, supplements and other health and wellness products needed to quickly change their profitability. They had been offering volume discounts to their customers. I told them this is why their bottom line profits were not where they wanted or needed them to be. My client family member was shocked that lower prices for bulk purchases were hurting their profits.
I explained that a lower price had become their businesses standard. If I was to place an order and got a discount every time I ordered, I would always expect the products to be purchased at a discount.
We changed their pricing policy and communicated with their customer base. We explained that discounts would be given on some orders and not all as that was not going to keep the company in business. We also communicated to their customers that discounts might not be available all the time or on every product purchased.
At first, my client family member was afraid that their business would lose customers. I worked with my client family member to clearly communicate with their customer base and I actually showed my client family member how much profit the company was losing with the discounts. Giving a customer just a 5% discount actually meant they had to sell 35% more to keep the same profit margin. It is more difficult to find more customers than to discount products for current customers on occasion versus all the time.
My client family member did keep discounts on occasion and kept a close eye on the discounts to prevent their profits from going too low. Their customers wanted them to stay in business and understood they could not stay in business long term if they were not making enough profits.
Bottom Line Boosters
If you need a fast action plan to boost your bottom line, here they are!
- Focus all your sales and marketing on only ONE target market. That market needs to be your most qualified prospects and a narrow niche.
- Focus on giving people ONE result with a proven service or product. Which of your products/services have the highest profit margin? Offer that product/service and not lead-magnets with a very low-profit margin. Eliminate any services/products that don’t have a lot of margins.
- Notice how much you are spending to acquire leads. What are you currently doing to generate qualified leads? Can you convert more leads with a simpler or better process? I have helped client family members increase their conversion by over 25% which has brought them over 20% more profits. Be aware of all lead generating activities and how much time, energy and money they actually cost you.
- Stop discounting your fees. Notice all price discounts as well as bonuses and add-ons you are using to close sales. Calculate the cost of giving those discounts and bonuses. These things truly add up. One of my client family members added up the discounts and bonuses given over a 9 month period and discovered over $100,000 was given away. Every dollar of a discount or a bonus is lost profit and money that would have impacted the bottom line of this client family member’s business. Once she saw this in writing she no longer reduced her prices. Instead, she created bonuses with a very high perceived value that had a low cost for her to deliver. Instead of the software, she gifted her new customers she added in a pre-recorded training webinar. The software was costing her $90 of profit per customer. The training webinar cost her nothing to deliver (it was recorded and automated) and she increased her profit by almost $100 per customer. Her customers loved receiving the training webinar and perceived it as very high value for them.