Tag Archives: business growth

Top Ways to Make More Money in Your Business

“Money is plentiful for those who understand the simple laws which govern its acquisition.”

~ George Samuel Clason, author of The Richest Man in Babylon

One goal that virtually every small business owner shares is to make more money. Of course there are the given ways of accomplishing this like raising your prices, increasing your number of customers, etc. But what are some practical, concrete ways to make more money?

 

Reduce Overhead

Overhead costs such as office space, supply costs and equipment maintenance can quickly chomp away at your profit margins. Perhaps the most straightforward way to maximize your revenue is to reduce or eliminate unnecessary overhead expenses. Fortunately, we’re living in a time where small business owners have more options than ever, which makes this fairly simple.

Here are just a few ideas:

  • Downsize your office space
  • Renegotiate with your landlord for better leasing terms
  • Cut supply costs by seeking out new vendors
  • Allow employees to telecommute whenever possible
  • Purchase energy efficient equipment
  • Outsource tasks such as accounting and HR rather than having full-time, dedicated staff members

 

Go Paperless

Paper is both costly and a threat to the environment. According to The United States Environmental Protection Agency, “The average office worker uses about 10,000 sheets of paper per year.” You can save a great deal of money by going paperless or at least coming close to it.

What’s the exact return on investment for going paperless? A McKinsey Global Survey found:

  • 28 percent of businesses achieved full ROI in less than six months
  • 59 percent achieved it in less than 12 months
  • 84 percent achieved payback in less than 18 months

Going paperless:

  • Increases productivity (employees can quickly search for documents via a digital database)
  • Frees up office space (making it easier to downsize)
  • Can enhance your brand reputation

 

Practice Conversion Optimization

Conversion optimization revolves around adjusting your website to increase the percentage of visitors that convert into customers. It relies heavily upon psychology and behavioral analysis to better understand what makes your customers tick. Some specific examples of conversion optimization include:

  • Modifying website layouts
  • Testing different color schemes
  • Experimenting with different call-to-action buttons

Check out the Conversion XL blog to learn more about this practice.

 

Create a Referral Program

People intrinsically trust recommendations from friends, family, colleagues and others. A global study from Nielson even found, “84 percent of respondents trust recommendations from people they knew.” You can cash in on this phenomenon and make more money in your business by creating a referral program.

A referral program gives existing customers a discount, freebie or other perk for referring someone they know. Not only does this generate new customers, these individuals tend to be more loyal and valuable than other customers. This can have some immense benefits for the long-term sustainability of your business and should help solidify your brand. Consult the Referral Programs 101 guide for more on developing a referral program.

There are several ways to make more money in your business. It’s a matter of devising an effective strategy that works for you. The right approach should increase your cash flow, open doors for expansion and potentially attract investors.

 

 

 

Is Your Business Financially Healthy? Look for These Signs

If you’re seeing solid sales, gaining new customers, building positive relationships with vendors and more, you may think that your business is in great shape. However, there could be more lying beneath the surface that needs to be assessed than just “vanity metrics.”

In some cases, these metrics can be deceiving. To gain a clear perspective on your business’ health, you need to look for a few key signs.

 

A High Net Profit Margin

First things first. Look at your net profit margin to gauge your overall financial performance and the direction your business is heading. More specifically, compare it with other companies within your industry.

This graph from NYU displays margins by sector in the U.S. and will show you how your business stacks up against your industry at large. For instance, a company in the advertising sector with a profit margin of 10 percent would be showing signs of strong business health because the average net profit margin is only 6.04 percent. If that number was lower, at 3 percent, the business could be in trouble.

 

A Low Debt-to-Assets Ratio

According to Investopedia, “Total debt to total assets is a leverage ratio that defines the total amount of debt relative to assets.”

Why is this important? Knowing this ratio allows you to determine your company’s level of financial risk. In order to calculate your debt-to-asset ratio, combine your short-term and long-term debt and divide it by your total assets.

For example, a company with $1 million in short-term debt, $1 million in long-term debt and $5 million in total assets would calculate by dividing $2 million by $5 million for a debt-to-assets ratio of 0.4.

Generally speaking, the lower the number, the better your business health and vice versa. If you have a ratio lower than 1, you should be in pretty good shape. As Accounting Tools points out, “A ratio greater than 1 indicates that a company may be putting itself at risk of not being able to pay back its debts.”

 

Sustained Revenue Growth

You’re bound to see ups and downs in your sales figures. There are a plethora of different factors that can contribute to this including the season, product launches, promotions, industry trends, etc. But if you’re looking at your profit-and-loss statement and seeing a perpetual increase in revenue, then that’s a sign that your business is in good shape.

Keep in mind that this doesn’t necessarily have to be a massive surge in profitably. You’re just looking for a clear sign of upward movement over a prolonged period of time (e.g. three years or more).

Business health is critically important and is something you should consistently keep tabs on. If you notice signs of good health, that’s great. Rinse and repeat.

If you notice any red flags, it’s a sign that a particular area demands your attention. Carefully make the necessary adjustments before it’s too late and you’re in a crisis.

 

Is it Time for a Second Location?

Growth and expansion are natural goals for most business owners. At some point, you’ll want to take things to the next level. But is it time for a second location? It’s wise to ask yourself a few key questions before taking the plunge.

 

Has your primary location reached its full potential?

Some business owners jump the gun and launch a second location without their flagship store ever truly reaching its peak. This is problematic because you may give less attention to your main moneymaker, which ultimately hurts your company as a whole.

Ideally, your primary location will have reached at least 80 percent of its potential before moving onto a second location. You’ll want things to be operating nearly flawlessly to minimize any painful setbacks.

 

Is your business model replicable?

Many business owners have experienced unbridled success at their first location only to fail at their second. To warrant the opening of a second location, your current business must be replicable. You’ll want to know for certain that you can duplicate the positive results you’ve seen initially.

Perhaps the most integral aspect of duplicating your business is having sound leadership at your second location. You can’t be at two places at once, so other managers will need to step up to the plate.

 

Is there enough demand for a second location?

Perform plenty of market research to gauge just how receptive consumers are likely to be to a second location. Will the projected revenue justify the additional investment, marketing, maintenance and overhead costs?

Be particularly diligent with your market research if you’re branching out to an entirely new city. Demand can fluctuate considerably depending on the locale.

 

Do you have adequate cash flow?

Cash flow is essential for getting things started out on the right foot. If you’re already struggling financially, it’s going to be an uphill battle the entire way. Ideally, stay away from partnering with outside investors and spending other peoples’ money because things can get messy in a hurry and diminish your long-term profit margin.

According to Jennifer Martin, principal consultant at Zest Business Consulting, “The ideal scenario for funding a second location is paying for it yourself.” But if you have to get outside funding, she suggests asking yourself whether you would invest that much in someone else’s business.

“Calculate your success rate thoroughly,” Martin advises, “then add 35 percent to whatever figure you come up with, because no matter how diligently you crunch the numbers, you will always have unexpected expenses.”

 

Are you prepared for the inevitable growing pains?

There are bound to be some curveballs with any type of business venture. It’s inevitable. Make sure that you’re prepared to handle any issues that come your way without them sabotaging either your flagship or second location.

Opening a second location definitely makes sense under certain circumstances and is the logical next step for building your brand. Just make sure that you think it all through before proceeding.

 

6 Ways to Grow Your Business

Congratulations if you’ve been fortunate enough to survive the startup stages of your business! You’ve made it further than a lot of other business owners ever will. But what comes next? There are several different ways to grow your business and take things to the next level.

 

1. Form a Key Partnership

Businesses are constantly partnering with one another in ways that are mutually beneficial. Just think of Apple and IBM, Spotify and Starbucks, UNICEF and Target — the list goes on.

One means of rapid expansion is to find a key partnership that serves as a symbiotic relationship to both parties. Hint: It doesn’t necessarily have to be with a company in your same industry.

 

2. Try a New Marketing Strategy

The great thing about marketing is the endless number of possibilities and combinations. Try experimenting with a new marketing medium if you’re looking to reel in a larger portion of your demographic.

Here are some of the top digital marketing trends for 2017, according to Smart Insights:

  • Content marketing
  • Mobile marketing
  • Conversion rate optimization
  • SEO
  • Online PR
  • Communities

 

3. Open a Second Location

Is your brick-and-mortar business swamped with customers day in and day out? Is it getting congested to the point where it’s hurting the customer experience?

If so, you should definitely consider opening a second location. Of course this requires an investment and will come with some intrinsic growing pains. But the payoff can be huge. Just be sure that you have a definite means of getting financing and carefully consider the optimal locale.

 

4. Add a New Product/Service

If you’ve had good results with your existing product or service, you may want to take a stab at offering another. This could complement something that’s already popular or could strike out in an entirely new direction. The important thing is that it genuinely fulfills the needs of your built-in demographic.

Be sure to perform plenty of market research to gauge receptiveness and develop a plan for raising awareness. For more on a successful launch, consult this resource from Kissmetrics.

 

5. Franchise Your Business

Do you have a system in place that’s successful and replicable? If so, there’s always the possibility of franchising it. When done correctly, this can be extremely lucrative because you’ll A) earn an ongoing royalty and B) build even more brand equity.

The only issue is that you need to ensure that you protect your intellectual property and choose franchisees that will be assets, not liabilities. This post from Forbes will give you a rundown on the basics involved with franchising if you’re interested in going this route.

 

6. Go International

In some cases, partnering with a foreign distributor makes sense. If your product/service has flourished domestically, why not take it to a global market? Just look for potential business partners out of the country. LinkedIn is a great resource for this.

Growth is the goal of most business owners. Experimenting with one or a combination of these ideas can be your ticket to expansion without the growing pains.

 

How to Start the New Business Year on the Right Foot

Each new year presents an opportunity for business progress, growth and improvement. As we move further into 2016, it’s the perfect time to examine the previous year and determine what went right and what could use some improvement. Looking at your business in an objective light can provide some key insights and help you take action to accelerate growth moving forward.

 

The Importance of New Year Reflections

“You can’t connect the dots looking forward; you can only connect them looking backwards.” — Steve Jobs

A big part of paving the way for future success is reflecting on the past. This allows you to see where mistakes were made, spot inefficiencies and identify any weaknesses in your overall business infrastructure. At the same time, you can figure out where you’ve been most effective and pinpoint past choices that contributed to your current success.

Without adequate reflection and evaluation, it’s hard to gain any real perspective on your business. In turn, you may end up floundering in circles in the new year.

 

Where to Make Changes/Improvements

To gain momentum, identify the specific areas that need your attention and where adjustments must be made. This can be done by examining some key areas and comparing performance against your expectations. Look at:

  • Production
  • Marketing
  • Sales numbers
  • Employee retention/turnover
  • Profitability

Furthermore, utilize a variety of metrics to determine precisely what needs to be changed. For production, you may want to look at how often quotas were met, manufacturing capacity, number of product defects, workforce skill set, etc.

For marketing, you could examine ROI, sales growth, customer retention, and so on. Regardless of the areas you’re evaluating, use concrete metrics to eliminate any guesswork and ensure that you know exactly which issues need to be addressed this year.

 

Making This Year Better Than Last

Although the specific areas in which businesses are looking to improve can vary significantly, here are some of the most common to work on:

  • Upgrading Talent – Your employees are the foundation of your company — and shaking things up by replacing mediocre talent with A+ talent can be a real game changer. Experts suggest that searching for someone who can do it all is often unrealistic. You’re better off deciding which skills are most integral and finding employees who excel in these areas.
  • Updating Policies – We live in a dynamic world with constant change, which means that policies set a few years ago can be impractical today. It can be worth your time to examine existing policies to see what’s no longer relevant/effective and make the necessary changes.
  • Increasing Customer Retention – According to research from a study conducted by Bain & Company found on the Harvard Business Review website, “Increasing customer retention rates by 5 percent increases profits by 25 percent to 95 percent.” This shows the importance of providing the best possible customer experience and focusing on customer service.

 

The new business year is the ideal time to reboot your company and come up with solutions for any problem areas. Looking to the past and identifying flaws, enables you to fix them and put your business in a better position to succeed moving forward.

 

Photo by williamcho