Most small business owners are looking to grow – both their revenues and profits. It is pretty easy to grow revenues at the expense of profits. Getting the two to grow together is far more challenging. In today’s world, if you are not growing then you are being left behind. Standing still is not an option for most companies.
When you drill down into the crux of the matter, there really are only three ways in which you can grow your profits. You can:
- Sell more to your existing clients
- Win more new clients
- Reduce your costs
Driving cost out of your business processes should be an ongoing activity, something to which you should give fairly constant attention. As soon as you take your eye off costs, they have a habit of creeping higher. This happens in even the smallest of small business. Inefficiencies creep in and productivity tends to suffer.
Interestingly, it is often the marketing and sales budgets that come under most pressure. Unexpected costs can creep in and effectively nibble away your profit margins. Ensure your marketing budget continues to be spent wisely. A lot of marketing budgets are wasted simply because companies direct their marketing to the wrong people.
It is critical you know which market niches to target and then focus your marketing expenditure on reaching the people in those niches. Marketing to any other group is simply a waste of time and money.
Selling costs quickly rise when you start visiting prospects and spending time with those who will never buy from you. One of the most important skills you can develop is the thorough qualification of all prospects. You probably have qualification criteria already defined as part of your written sales strategy, apply them and walk away from those prospects who don’t meet them.
The other side of growing your business is to increase your overall sales revenue. There are two ways to do this, selling more to existing clients and selling to more new clients.
It is well known that selling more to your existing clients is easier than selling to new clients who have never bought from you before. Your existing clients know you, they (hopefully) like you and have gained tangible benefits from their previous purchases. They will be receptive to learning about any other products/services you sell that will benefit them. Yes, they may already be buying this from one of your competitors but your good track record as a supplier gives you the opportunity to capitalise should the existing supplier slip up.
Selling costs in relation to selling to existing clients should be relatively modest. You are probably in touch regularly with them about their original purchase(s), so getting them thinking about buying other products/services from you will be easy. Make it a rule that every time you communicate with a client you explore the potential for one of your other products. It won’t take long before you start to see a flow of additional high-margin sales from your existing clients.
You can’t thrive by attacking costs and selling to your existing clients alone. You must also be topping up your client list with new clients. This is usually the toughest part of running a small business. Finding new clients takes considerable time and a consistent level of engagement over that time. It is an expensive process – some experts claim it is 10 times more expensive to win a new client than it is to sell to an existing client.
Clearly, the one message here is look after your existing clients and don’t drive them away through poor post-sales support. Look after them and secure what extra sales you can while continuing, in parallel, to look for new clients.
As the cost of winning new clients is so high, you need to become as efficient as possible and cut out any unnecessary activity. Mentioned above was to avoid selling to prospects who would never buy from you. Know what makes a good prospect for you and focus on finding these, avoiding the temptation to invest time selling to anyone else.
- Look for ways to take costs out of your business by automation and by using technology.
- Confirm your prospect qualification criteria and apply them.
- Ensure you make the most of your client relationships.