How To Increase The Bottom Line In Your Small Business
So, you’ve got that side hustle up and running. It’s starting to feel more and more like a real business. And you’re optimistic that it will continue to grow. While that may be satisfying to your ego, you’re also doing it for the financial rewards. How do you increase the bottom line?
The majority of small businesses fail within the first two years. “Fail” means they were unable to turn a decent profit, or any at all. So it’s important to manage your fledgling business with an eye constantly on the finances and be constantly looking for ways to increase what you get to keep at the end of the month.
Here are five areas to consider that will help increase the bottom line of your small business.
The Value of Customers
One of the largest expenses most every business has is customer acquisition costs. That’s the total measure of what it costs to get a new customer. If you sell a customer only once, you’re not only virtually starting over each week or month, but your customer acquisition costs will be very high.
Obviously, the best solution is to cultivate more sales from those who have already bought. The good news is that it’s a very fertile field. They
- spend three times more as a repeat customer
- are twice as likely to buy an upsell offer
- are six times more likely to try a new product offering
The next best way to inexpensively find new customers is to ask for referrals. While you may have to offer incentives or discounts, it’s far less costly to obtain a new customer through a referral than by cold prospecting or advertising.
Collect the contact information of everyone who does business with you. Since they already like you and what you sell enough to purchase from you, they’re very likely to be willing to refer you to their friends who may also be in need or want of what you sell. The key? ASK.
It won’t do much good for the monthly profits if you don’t pay attention to the finances and keep up with the paperwork. A good system will allow you to quickly determine how much you’ve sold, who still owes you, and how much you’re actually making each month. To accomplish that, you will need
- A good invoicing and payment system.
- An accounting system that’s easy to use.
- An accurate record of the costs and margins of all items you sell.
When you’re first starting out, it’s tempting to just go with a pad of receipts and send an email as your invoice. There are two good reasons you shouldn’t go that route. First those receipts are going to be a very real pain when it comes time to do the books. Second, you need a trackable invoicing system that can quickly and easily tell you who hasn’t paid. Some systems even have automatic follow-up built in when invoices haven’t been paid within a specified time. Take the time to set up the books early on and you’ll thank yourself later.
Track Margins and Sales Volumes
Yes, it would be awesome to have something you buy for five dollars and sell for $100, right? But what if it’s not selling? Conversely, if you’ve got something that’s a hot seller but you’re making practically nothing on each sale, that doesn’t make good business sense,either.
The solution is to find the combination of price points, wholesale costs, and customer interest that not only results in sales but also profits. Get rid of non-sellers or items that have margins so thin it costs more to handle them than they produce.
You probably know by now that, as a business owner, your time is of high value. So whenever possible, find ways to outsource tasks that don’t require your level of skill. Use your time instead on what you’re being paid for – building the business and being a boss.
If you find the idea of outsourcing daunting, for whatever reason, keep in mind that outsourcing is what you’ve been on the other end of as an employee. Your boss hired you to do things that made no sense for him to try to do himself, or that he simply had no time for. So, yes, you are now the boss and it’s your turn.