June 13, 2024
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By Atul Oka, Senior Director of Strategy and Business Development, DUKE Heights BIA
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While most business owners want to increase profits, most do not have a plan to do so. Some say they will increase profits by boosting sales. But how will you boost sales? Will you hire more salespeople? Can you afford more salespeople? Will you leverage additional sales channels through which you can sell your products or services?
Will you try and help any customer that comes to you? Can you afford to do everything for every customer? Do you know which products or services are worth your time to produce or deliver? Do you know which products or services are actually profitable once you take input costs, overheads, salaries (Yes this includes your salary as well), delivery and other costs into account?
Will you perhaps expand to another location or add additional products and services? What will this entail?
It seems that no matter what the initial idea, some thought and planning may be required to make this a reality. This “plan” is often called a business strategy. It could be either a strategy for a specific functional area such as marketing or sales, or it could be a comprehensive business strategy. Developing a business strategy can be difficult but it is often the difference between success and failure. If your business does not have a business strategy, speak to someone who can help you create one.
Understanding your market and positioning your product or service for best fit is an effective way to increase profitability. Differentiation is also important and helps to distinguish your brand from the competition. Creating a niche and making your business different from your competitors helps with differentiation and does not force you to compete with large companies with scale that can offer the same products or services at a cheaper price. Every business should think like their target audience or customers, and know their exact needs, motivators, wants, dreams, goals, and interests. Find out what is valuable to your customers and what they are willing to pay a little extra for. Ever wonder why Starbucks (a normal coffee shop) was able to differentiate enough to grow much faster than its competitors?
Thirdly, it is important to create internal targets and goals. This helps to determine how well you are doing. One way to measure progress toward achieving your business goals is to use key performance indicators (KPIs). Another is to use customer satisfaction as a benchmark for external performance and success.
KPIs provide us with an immediate snapshot of the overall performance of our businesses. To be used effectively we need to measure and track the key performance indicators crucial to the success of our business. They also play a key role by providing vital decision-making information.
Customer satisfaction can be measured using the Net Promotor Score (NPS) which we discussed in our last article. Have you done this for your business yet? How high is your Net Promoter Score?
“Profitability is coming from productivity, efficiency, management, austerity, and the way to manage the business”- Carlos Slim
