Most of the time, small business owners can’t afford to wait for the results of long-term, large-scale changes to their business model. As much as possible, if you want to turn a bigger profit as a small business owner, the quicker you can do it, the better. The following simple changes can help you get started maximizing your profitability right away.
- Convert One-Time Clients Into Recurring Clients
There are many reasons why converting your customers into repeat clients can quickly improve your profitability. Recurring customers tend to spend more and purchase more frequently than new customers.
Repeat customers also contribute to the longevity of your business. A study of e-commerce sites showed that by their third year of business, revenues are mostly dependent on returning customers and referrals. In other words, recurring revenue helps businesses maintain the predictability of their profits and possibly helps them avoid the fate of businesses that close before reaching year five.
- Encourage Referrals
According to a survey of over 1000 small business owners, referrals are the number one driver of new business. If there is one marketing channel that can maximize your profits, referrals would be it. While you don’t have to create something as complicated, there are probably simple things you can do to encourage your satisfied customers to refer your business to their contacts. Consider testing out the following:
- A referral program with discounts and perks in exchange for referrals, similar to the Bomgar example above.
- Encourage public reviews and testimonials from satisfied customers. After purchasing from you, customers should be encouraged to post reviews on social media. This can be risky when it comes to bad customer experiences, so make sure that your customer service and product quality are in top shape.
- Offer Up-sells or Cross-Sells on Popular Items
You can also focus your efforts on selling customers other products (cross-selling) or offering them a higher priced option (up-selling) as they are transacting with you. This raises the average profit you get per transaction or per customer.
An upsell would mean that as a customer is buying a product, you offer them a higher priced option from the same product line.
- Remove or Delegate Non-Essential Tasks
Small business owners are notorious for taking on too much work, since they often cover everything from customer support to product creation to marketing. If you find yourself doing too many administrative tasks, consider if those tasks are essential to keeping or acquiring customers.
You can delegate some tasks that take your time away from doing more profit-generating work. For example, good customer service can lead to more purchases and increased value of purchases, according to a report from McKinsey. If customer service takes several hours out of your week—hours that could be better spent on higher-level tasks such as marketing and business planning—then delegating it might open up more opportunities for your business to grow.
- Eliminate Bottlenecks in Your Sales Funnel
Another way to maximize your business profits is to take a critical look at your sales funnel and see where it can be improved. List all the steps it takes for a customer to find out about your business and actually purchase something. These steps could take place online, where they find your website, browse, and buy something from your online store. An offline sales funnel might include customer walk-ins to your store, sales calls, or incoming customer calls.
Once you have all the steps listed, ask yourself and any relevant staff the following:
- In which part of the sales process do most potential customers drop off? Is it when they find out the price, get in touch with customer service, or use up a one-week trial period? Spot the leaks in your sales funnel and see what measures you can take to stop qualified leads from losing interest.
- Is there a way to simplify your funnel? The more steps a customer has to go through before a purchase, the more chances they have for dropping out of your sales funnel altogether. If you can make the transition from decision to purchase easier and more satisfying for your client, the better. As an example, food bloggers Dustin and Lacey Baier have a business running ads on their site and selling a cookbook. By simplifying their sales funnel through focusing on their email opt-in list, they were able to increase their sales by more than a multiple of ten.