Every business has a gold mine in its current customer base. But not all business owners remember to mine this gold because they are too busy trying to attract new customers or developing new products or services. This is the perfect time of year to step back and remember the three easiest ways to grow your business revenue using your existing customer base.
1. Upsell current clients.
Offer steady customers a product or service with more features than they usually purchase. Examples include moving a client from coach to first class, from a budget vacation to a luxury one, from a standard model car to a luxury version, from an off-the-rack suit to a designer suit, from the standard service to an all-you-can-eat version, and from a regular meal to a super-sized one.
Some customers simply need to be given permission to splurge on themselves, so why not by you? Others have outgrown the standard package but find it hard to break routine. With a gentle nudge from you, a percentage of your clients will purchase the upgrade, therefore boosting your sales with little effort on your part.
2. Cross-sell current customers.
Restaurants practice this the most, asking us if we want appetizers, dessert, or fries with our entrée, and you can apply this to your business too. If you offer two services and a client is only participating in one service, make sure they know about the other service you offer, and find out if they have a need for it.
This is called cross-selling, where you offer a current customer a service or product that they don’t already purchase from you. For example, an attorney that does trademark work for clients might also let clients know that they do wills, too. A pool builder who also offers maintenance service will want to follow up with the new pool owner once the pool is built. A real estate agent who also manages properties will want to let rental property investors know about this service.
3. Raise prices on current customers.
If your costs have gone up but your prices have remained the same, you’ve accidentally given yourself a pay cut. No one wants that, so raising prices is an option that will restore your profit margin to the way it was before costs went up.
If it’s been a while since you’ve raised prices, it might be time to make an adjustment. Review your price list for your services and products and determine what you need to do to bring the numbers back in balance. Let us know if we can help with some profit margin or breakeven calculations to help you make this decision.
Raising prices requires careful consideration and timing. Customers do expect periodic price adjustments, so don’t let procrastination or fear hold you back from making a good solid business decision here.
All three of these strategies will help to raise your average revenue per customer and boost your overall revenue without a lot of additional work on your part. Try these strategies so you can enjoy a more prosperous 2018.
One of the many online marketing options available for businesses is blogging. A blog can act as a company’s daily newspaper, letting customers and followers know the latest news about what’s happening. It can also be a wonderful revenue-generator.
As long as the content of your blog is relevant to your readers, you can post on a wide variety of topics. You might want to let clients know about an upcoming sale, a new employee, or a tip related to a product or service of yours.
Some businesses make a separate revenue stream out of blogging. The most profitable blog today is the Huffington Post. Revenue from blogging can be earned in many ways:
- By selling ad space to people who want to get their products in front of people who read your blog
- From sponsors
- By holding events your readers attend
- From commissions from the sale of products on your site
- By creating products and services such as membership sites which allow paid access to your resources
Making money from blogging through one of these revenue streams takes work. Not only do you have to find or create content, you’ll need to attract readers too.
You can also simply use your blog to generate a following for your products and services. The right content can improve customer service, educate customers on your products which leads to better client retention, or inform them of the benefits of your products during your sales cycle.
If you’re not a writer, there are plenty of freelance writers available that you can hire to create your blog posts. You can also curate articles, meaning you can find existing articles and ask the author if you can re-publish theirs.
Creating a blog is easy with software like WordPress or apps like Blogger.com WordPress.com, and Wix.com, and all of these solutions are free.
Think about how a blog can impact your business for the better.
If you perform a service or ship a product before you get paid, then you likely have a balance in your Accounts Receivable account. If customers pay when their invoice is due, all is right with the world. If they don’t, then your cash flow slows down and your bank balance is not as high as it should be. Here are some tips, preventive and supportive, to help you keep your accounts receivable current.
When you deliver your service or product before your client pays you, you are in effect their “bank,” granting them credit. Not everyone deserves to be granted credit. Consider running credit checks, especially if you are billing large amounts of money for your sized business.
You may also want to ask for a retainer or deposit prior to starting work or shipping your products. This will smooth your cash flow and reduce your credit risk.
Offer Multiple Payment Options
When a customer is ready to pay their bill, make it easy on them by offering multiple payment options. Perhaps they will pay faster if you take payment by credit cards. Many people have extra money sitting in their PayPal accounts, so that is another payment option. Apple Pay and Android Pay are relatively recent options to consider adding.
You may also want to revisit the credit cards you offer: MasterCard, Visa, and American Express are universal, but many places also take Discover and Diners Club. If you are doing international business, consider JCB (Japan), China UnionPay, and RuPay (India).
Once an unpaid invoice has reached its 90-day mark, the chances of collecting it are about 50 percent. This means that you will need to put some aggressive collection processes in place prior to the 90-day mark.
If the invoice is due in 30 days, start at the 35- to 40-day mark with a friendly reminder. At 60 days, your customer needs a strong reminder and perhaps a phone call. At 75 days, they need to know what consequences there will be for not paying. Will you report the customer debt to credit agencies? Will you turn the account over to a collection agency?
At 90 days, it’s probably a good idea to make one final collection effort and then turn it over to a collection agency. It might sound too soon, but the odds of collecting something much older go down significantly as time passes.
At any rate, create your own process, and automate it as much as possible. The main thing is to stay on top of it.
Past Due Accounts
From how you first engage with your clients to the last steps in the collection process, there are many cost-effective techniques to avoid past due accounts and the unpleasantness that goes with them for both parties. If this is an issue in your business, try these ideas above and reach out if you’d like our help.
Increasing your profits might sound like it’s an unattainable dream just out of your reach. But there are a finite number of ways that profits can be increased. Once you understand what they are, you’ll have clarity on how to best reach your goals.
There are two primary ways to increase profits:
- Raise revenue
- Lower expenses
That’s not particularly enlightening or instructional, is it? Let’s look at the four ways you can increase revenues and the four ways you can reduce expenses to get clearer on what actions we can take.
Four Ways to Increase Revenue
1. Raise prices
The easiest way to raise revenue is to simply raise prices. However, this is not foolproof and assumes you’ll be able to maintain the volume of sales you’ve achieved in the past.
This method is also limited by market demand, what your customers are willing to pay.
2. Add new customers
Adding new customers is what most entrepreneurs think about when raising revenue. Increasing your marketing or adding new marketing methods is typically the way to add new customers.
Another related option is to work hard to keep the customers you already have. You can also potentially contact the customers you lost and ask them to come back.
3. Introduce new products or services
For some companies, your products and services are changing every year. For others, not so much. To increase revenue, consider adding new products or services that will bring in an additional revenue stream that you didn’t have before.
Even if your products are changing every year, you can consider adding something completely different that your customer base would love. For example, a hair salon could add a nail desk, a clothing store could add handbags or shoes, a grocery store could add a coffee bar, a restaurant could add catering, a landscaper could add hardscaping, and so on.
The final way a business can increase revenue is to acquire another business in a merger or acquisition.
Four Ways to Reduce Expenses
1. Negotiate for a better deal with vendors
If you’ve been working with a vendor for a while, you may be able to re-negotiate your contract with them. This is especially common with telecom companies. Call you phone provider and ask them for the latest deal. They always favor new customers over long term customers, but they don’t want to lose customers either. Just calling them usually yields a better price than what you are paying now.
2. Change vendors
If a vendor has gotten too expensive, it might be time to look for a new vendor. Health care insurance seems to be in this category. Often, changing providers will lower your costs.
3. Cut headcount
If there is not enough work to support your employees or not enough cash flow to pay them, then it might be time for a layoff or restructuring. You might also consider outsourcing a function that you previously did in-house.
4. Cut the expense or reduce services
It might be your business no longer needs to spend money on an expense. Perhaps this expense has been automated. In this case, it’s an easy decision to cut the expense out entirely.
Those are the eight ways to increase profits. Which one makes the most sense in your business? Create a plan around these eight ideas to boost your profit in 2017, and let us know if we can help.
Are you ready for 2017 to be even better than 2016? If so, take a few minutes to reflect on the questions below and take action to set your 2017 profit plan.
Question 1: What were the three best business things about 2016?
No need to re-invent the wheel. If you knocked it out of the park in 2016, can you wash, rinse and repeat these tasks in 2017?
If you’re having trouble thinking of three things, here are some hints:
- What apps saved you time and money?
- Did you make some good hires?
- Did you let go of a bad hire or two?
- Was there a marketing campaign that really worked?
- Were there any events you went to that generated great ideas?
- Did you add or remove products and/or services?
- Did you buy new equipment or open a new location?
Summarize the three best things that happened in your business for 2016 and think about how you can repeat them to enhance your 2017.
Question 2: What were the three worst business things about 2016?
While we don’t want to dwell too much on our failures, we do want to learn from them. Think about the three things that are causing you to lose time, money or gain stress, and decide if you can make changes for 2017.
Question 3: What vision do you have for your business in 2017?
At the end of 2017, what has to have happened in order for you to have a successful year? Think in terms of metrics as well as intangibles, such as peace of mind and happiness.
Once you know your destination, the fun is in creating a roadmap to get you there.
Your 2017 Profit Plan
If your vision includes financial goals, then creating a profit plan is one way to measure your progress throughout 2017. Start by deciding how much profit you want to make in 2017. From there, you can compute your revenue goal and make a plan. Then you can add expenses to complete the budget. Here’s an example:
Let’s say you want to make $50,000 in profit for 2017. You can do that in a number of ways:
- Generate $500,000 in revenue and $450,000 in expenses.
- Generate $2 million in revenue and $1,950,000 in expenses.
- Generate $150,000 in revenue and $100,000 in expenses.
- And so forth.
From your profit number, you can create a revenue plan. A revenue should include how many items you need to sell. Like this:
|No. of units||Price||Revenue|
Once you have your revenue plan, you can fill in your estimated expenses.
You might be thinking that this sure sounds a lot like making a budget. And it is. But it’s far more fun to work on something called a profit plan than it is a budget. And if you need us to do the number-crunching part, please feel free to reach out any time.
Here’s to a very happy and prosperous 2017.
Some numbers need reviewing on a daily basis, and one example of this is cash. When cash is coming in from a number of places, it’s great to have a daily summary of what was collected.
It’s also great to make sure all the collections hit your bank account so you can feel confident that no errors were made along the way. A daily cash reconciliation report will serve both needs very well.
A daily cash report will vary depending on the type of business you have, but it will look like a combination of a bank reconciliation and a sales report wrapped into one.
If you are managing your cash closely from day to day, then this report will help you stay sane. You’ll need two very brief spreadsheets to get started. The first one below is your daily sales from all sources. Your accounting system may be able to generate this.
|Total Bank Deposit||$900.00|
|Total Credit Card Due||$600.00|
If your accounting system is up to date, all you’ll need to do is pull the cash balance and adjust for today’s activity. The following day, you can double check your accuracy and adjust accordingly using the last two rows.
|Daily Cash Report|
|Book Cash Balance||$5,000.00|
|Deposit from Today’s Sales||$900.00|
|Less Checks Written Today||($1,200.00)|
|Expected Bank Balance Tomorrow||$8,300.00|
|Actual Bank Balance||$8,300.00|
|Explain any differences|
If your accounting system is not updated in real time, you’ll need to start with the bank balance and correct it for uncleared transactions as well as list today’s activity.
|Daily Cash Report|
|Deposit from Today’s Sales||$900.00|
|Less Checks Written Today||($1,200.00)|
|Checks Still Outstanding||($3,000.00)|
|Deposit from A/R Paid||$5,000.00|
|Expected Bank Balance Tomorrow||$8,300.00|
Using these formats, you can easily extend them to cover the entire week. This way, you’ll know what your cash balance will be from day to day.
If you see the value of this report for your business and would like help creating it, please reach out.
A great way to speed up your cash flow is to get paid faster by customers who owe you money. One way to do that is to examine your payment terms to see if you can accelerate them. First let’s talk about what payment terms are common. Then I’ll share a study that showed which payment terms generate the fastest payments.
Traditional payment terms are spoken in the following format:
Percentage discount/(Days due from invoice date), “Net” (Days due before payment is past due)
An example is 2/10, Net 30. It means to the customer that if they pay within ten days, they can take two percent off of the invoice due amount. If they don’t want to do that, they need to pay the full invoice within 30 days of the invoice date.
You could write “2/10, Net 30” on your invoice, but you will get paid faster if you write it out in plain English.
If your industry “has always done it that way,” I encourage you to challenge the status quo. Getting your cash faster is important to all small businesses, so don’t let your industry hold you back.
Most corporations are required to take discounts if they are offered, so offering an early pay discount might help you get paid faster.
There are several studies on how to get paid the fastest. Of course they all have different conclusions! FreshBooks advises that “due upon receipt” terms can work against you as most people decide that that can mean anything. They suggest using wording that says “Please pay this invoice within 21 days of receiving it.” Here is their blog post on the topic:
Xero produced a page on the topic as well. Their research suggests that debtors pay bills 2 weeks late on average. They also suggest using terms of net 13 or less in order to get paid within 30 days. Here is their page on the topic:
Feel free to contact us if you’d like help deciding on payment terms for your business.