I recently wrote about a simple strategy that Amazon.com used to generate over $1 billion of extra revenue without increasing its costs. But what about your business? Do you find yourself working harder and harder, but not making more money?
Here are five time tested tactics to boost your bottom line and generate more profit.
1. Focus on Your Winning Market.
Which niche or subgroup of buyers are your best customers? Are you investing your best sales efforts and talent on these prospects, or are you dissipating your efforts going after too broad a prospect front?
If you can’t narrow it down to one market niche, how could you better score and filter your leads, so that you invest heaviest into those prospects with the highest odds of generating profitable business for your company?
2. Focus on Your Winning Product or Service.
Which of your products or services have the richest margins? If you use a certain product or service as your gateway sales lead, how is that supporting your relationship with the prospect down the road?
Too many companies let chance dictate which sale they focus on, and they pay dearly for their mistake. Instead, analyze which of your products or services you should focus your sales efforts on and which you should ignore, phase out, or simply get rid of now.
3. Improve Your Lead Conversion.
You spend so much money on lead generation, but are you really optimizing your sales conversion?
Whether you sell online, or through a field sales force, your company’s ability to turn leads into sales is a hidden leverage point to increase profits. For example, if you increase your conversion from 20% to 25%, that 5% increase in conversion will lead to a 20% or more increase in profitability (assuming your costs stay steady.)
4. Beware of sales team discounting.
One way to erode your bottom line is to let your sales team run free, offering discounts and other concessions to your clients. To see if this is hurting your company start by adding up all the sales concessions from discounts, to free add-ons, to special services your sales team has given to customers over the past 12 months.
You’ll be surprised when you add it all up. One of our business coaching clients discovered that his sales team was discounting one in every three sales, costing his company over $250,000 per year of lost profit. Remember, every dollar in sales discounts translates to money that could otherwise be dropped directly to your bottom line.
Set boundaries over what is and isn’t okay for your sales team to do during the sales cycle. Where possible, create bonuses they can add in that have high perceived value but low cost of goods sold. For example, you might offer two free training class admissions to a new customer when they buy a year’s subscription to your software service. A training class has a high value, but likely costs very little to add more seats to the room.
5. Fight Scope Creep.
Scope creep is when your customer alters the scope of your product or service offered with no additional revenue adjustments. It’s the bane of any service business.
For example, if you were an IT services company and agreed to monitor and care for 25 desktop computers and 4 servers at a company’s office for $1,000 a month, but then later found they had added 10 more computers to their lineup for with no additional monthly fee, you’ve just experienced scope creep.
Fight scope creep by being very clear what is and isn’t being offered in your packages. Put pricing for common extras that clients may want and let them know you’d be happy to provide these additional items for them at these pre-agreed prices.