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How to Improve Your Business by 10% in Most Areas but Actually Add Nearly 50% to Your Bottom Line
If you're like many small business owners, you're probably struggling with the day to day grind of trying to market your small business, and at the same time trying to grow your profits. Also like most small business owners you probably feel that your days are filled with troubleshooting, staff management, stock control, tax issues, growth, development, sales - you name it, your day is often burdened with everything but what you know you should be focussing on.
What you need to be focus on when it comes to marketing small business, isn't about working harder or longer, it's more about working smarter, and thinking strategically, and letting the effects of a smallish increase of a few small percentage points in a number of key areas of your business operations work their magic to naturally multiply the profits of your business.
To give a financial example of what I'm trying to tell you about, here is a simplified example; Imagine you have a retail business that sells a particular product, and in the course of a year, lets say you have 20,000 prospects that you attempt to sell to (these are typically your leads, or sales enquiries throughout the year) and from these 20,000 leads, you may end up selling to 10% of these, ie 2,000 products (this gives y a 10% conversion ratio).
Let's now imagine that each of these products sells for $100, and that 50% of that ($50) is your profit margin. In summary, 20,000 leads @ 10% = 2,000 sales @$100 = $200,000 turnover, with 50% being your profit margin, providing you with a $100,000 Profit.
This is now where the excitement begins with the magic of marketing your small business into super profits. Let's say that over the course of the next financial year, you were to focus on increasing each of those aspects by 10%. If you think that doing this is only going to add around 10% in total to your Bottom Line, then think again.
Let's assume you put some extra resources into some extra marketing during the next year and obviously measuring the response and results along the way, and you manage to increase your prospects by 10% from 20,000 to 22,000. Let's also assume that you did some extra work to increase your conversion rate by another 10%, taking it to 11%. This then gives us 2,420 sales for the year (22,000 x 11%).
The next area you work on is your price. Increasing the product price from $100 per product to $110, shouldn't create any real issues, providing quality is maintained. Try adding an extra service, or feature to accommodate for the price increase.
As well as the price increase, you can also allow for an expansion of your profit margin from 50% to 55%, (another 10% increase) will mean that from each $110 product, you will now be making $60.50 profit. So after the completion of the year, we have 2,420 sales at a margin of $60.50 = $146,410 Profit. An increase of over 46%. (Not the 10% that most people would have thought)
So there you have it. A true technique to amplify the true profit making ability of your business. So, just think about it for a moment, based on this simple sort of formula, how much do you think you would need to improve these aspects of your business to DOUBLE your profit? Not as much as you probably first thought. And , to add even further food for thought, what would this potential doubling of your profits do for the value of your business?
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