Making a Profit
By Julian Campbell
Well here we are at the end of another financial year and too many businesses experienced a difficult year. Turnovers have been down and profits non-existent. So now for the good news - it's easy to increase your profits! But the bad news is it's just as easy not to. What is the real secret? Well, if you keep doing the same things the way you have always done them, you will get the results you have always had. But to increase your profits, it follows that you must take some different, positive actions.
Unfortunately, for the past few years, since the more challenging times have prevailed, we have seen price-cutting becoming common practice. It is apparent in most industries and types of business and has now become a habit for many. This constantly amazes me since the old adage in the business world is Never cut your prices. Once a price cutting war begins, the result will be disastrous for everyone. Even the customer looses in the end as reliable businesses close. So why is it happening and what are the alternatives?
The common response I hear is "it's the only way I can keep my customers" and yet statistics still show us that only about 9% of our customers will shop on price. So what are the other 91% looking for?
Let's go back to the basics of business, which are often so easy to overlook when you are living a hectic, busy business life. There is really only one way to make money in business; bring in more money than you spend. Sounds obvious but why doesn't it happen? Let's examine the four areas that could improve your net profit - reduction of your variable costs or expenses, put your prices up, find more customers, or encourage your existing customers to spend more or buy more frequently.
The first is obviously the best way to increase your profit because any reduction in expenses goes straight to the bottom line. Increasing your prices is probably the least favourable, unless you are already grossly undercharging compared to your competition.
The areas too often neglected are the options, finding more customers and encouraging them to spend more or buy more frequently. I can see you thinking, "this is going to cost me more money, not make me money", but that is not the case.
The secret is in making your existing advertising, promotion and customer service work better for you. When you advertise are you really telling your customers what's in it for them, building such a desire in them that they must come and buy, or do you just put your business name in the headlines like so many do?
Do you and your staff make your customers feel so special that they want to come back again and again? Do you encourage them to spend more by really understanding their needs and satisfying them?
It requires a bit of effort, a bit of practice, a bit of dedication to your customer and a system for making it happen but think of the results! Those increased profits can be easy so, have a great new financial year.
Copyright © Julian Campbell 2007
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