8 February 2016 11:15
How to grow your business and your profit margin
Well done, you’ve made it through the start-up pains and are now operating a successful business. You are ready for the next step, which is to further grow your business and your profit margin, but how do you do it?
Strategic SWOT Analysis
You undoubtedly did a lot of market research when you first started your business (which is advisable to revisit every year) and you hopefully developed a business plan to help identify the direction of your business and the strategy with which to take. Part of this analysis should include a strategic SWOT (Strengths, Weakness, Opportunities and Threats) which will definitely have changed since you first began your business and started to grow your brand. Once you have updated your SWOT you will be able to clearly develop a number of new strategies focused on growing and defending your market.
Pricing & Costs
Inflation rises every year and your costs may also rise every year, however many companies fail to pass on those price increases to their customers, thereby eroding their profit margin. Price wars are ever prevalent, however customer expectation of quality and value still remains high regardless of this. A small price increase is accepted more easily by your customers if it is communicated properly, is justified and fair. If your raw costs have gone up, explain this to your customers.
“Over the last year, we have experienced increased costs 17%, therefore we need to make some changes to our pricing structure. We want to ensure we continue to deliver exceptional value and would like to offer a discount of 10% for 3 months to our fabulous loyal customers”.
Make sure you communicate your price increase internally and everyone is clear before you move forward and let your customers know of the change.
Quite simply sell more to existing customers. Does your customer know all of the products and/or services that you offer? You already have a trusting relationship with your current customer base, and (f you conduct regular customer reviews) you have a good understanding of your customer’s needs. Organise a meeting and discuss how you can further enhance their business with your products.
Upselling your product or service to your current customers is an easier sell than fighting for new customers.
A car salesman will upsell optional extras such as Bluetooth, a sunroof, electric windows.
Enter a new market segment, such as a new town or region. Expand the demographics of your market to include a wider age range or a different nationality for example. Another strategy you could employ would be to expand your sales channel or develop a new one, this could be selling your products online or building a bigger salesforce. For this stage of growth companies also look to develop new products or services.
A good example of this would be the retail market and the diversification to Click and Collect. This free service ensures the customer receives the goods they want with an efficient delivery lead time, whilst being a tool to bring customers back into the shops where they will receive additional product exposure.
Blog supplied by Tina Marshall - Founder of Creating Sense Ltd, a Marketing agency focused on Strategy, Innovation and Application. Access the same skills and experience of a large corporation, at a fraction of the cost. www.creatingsense.co.uk