MJN Accounting - Your business partner - Growing your business
You may recall in my last newsletter the concept of only needing to focus on ‘three’ areas to help grow a business and improve its profitability. Many business development books and consultants argue there are numerous aspects to consider. However, if you think of any business strategy you will find it fits into one of the three areas – sales, profit margin or expenses.
Over the next newsletters we will discuss each of these areas, and some of the underlying strategies that fall into each of these main groups.
When most business owners look to improve their profitability the first thing they consider is “cutting costs”. This is usually the last area of concern and I will explain the reason why in a later article.
The first area to focus on is Sales or Income
Increasing the business turnover can have the greatest profit effect of any enterprise. In addition many business valuations are based on their turnover. Therefore focusing on sales first can provide twice the value by increasing your profit and ultimately the value of your business.
I have spoken to many business owners who do not consider themselves as sales people. All businesses including service industries (ie electricians) need to have an understanding of the sales process otherwise they will be subject to fluctuations and potential loss of income.
While investigating water storage needs when building our home a few years ago I visited an irrigation and rainwater tank business. The business owner was very knowledgeable on his products, gave great advice, had the products for sale, but unfortunately didn’t understand the sales process. After providing the information to me he failed to follow up with questions such as “can I provide you with a quote” or “shall we meet again to discuss your requirements further”? Twelve months later the business had unfortunately but not surprisingly closed down.
Sales are an area we all need to work on so that we are comfortable talking to potential customers. The conversation and the customers may be different for each and every one of us.
Many people are frightened by the prospect of having to go out and find new customers. Many business owners comment that if they could get more enquiries, more leads, or find a way to make the phone ring or get people to walk through the door all their problems would be solved.
It is not surprising then that many businesses invest heavily in advertising when things get slow. Often there are other ways to win new customers or clients that do not cost anywhere near as much. Interestingly, these alternate strategies go untouched.
For example, your current customers or clients are often your best advocates so why not reward them for referring new customers or clients? Most of your clients assume that you are busy and probably not looking for more work. It can be as simple as asking your clients if they are aware of anyone that could do with your assistance and showing your gratitude if they would pass on your name. The old saying ‘word of mouth is the best form of advertising’ is surprisingly true.
Remember if you have just completed some work for a client (ie building work, painting, landscaping) then they will most likely be showing their friends and everyone else that visits. You immediately have a fantastic source of free advertising from a happy customer that you could utilize.
The other important area to consider when increasing the sales of your business is to remember your existing clients. They are still your client and they may very well need to purchase more product, service or advice from you in the future.
Focusing on growing your business by increasing customers or clients is often far more expensive than tapping into your existing one! Did you know that it is estimated, for an average business, to cost up to 6 times more to win a new customer or client than it does to have an existing one buy more from you?
In our next few newsletters we will explore other methods. In the meantime, if you want to explore business growth strategies for your business, please contact us.