The beginning of the year is upon us, and the question everyone is asking is, “How are we going to make this year more profitable than 2018?” Break away sessions to strategies are always good, however, the most effective organisations know that the best ideas didn’t come from high-level planning, rather, they come from the field.
1. Your winning market
The saying goes, ‘The riches are in the niches.’ This year, stop spreading your sales focus thinly across several markets. Review your data on the which niche or subgroup of buyers make up your best customers. Then laser focus your best sales efforts and talent on these prospects this year. If you don’t have data on your buyers, then make a commitment to invest in your CRM software this year, so that next year your focus can be accurate.
2. Your winning product or service
Don’t let chance dictate which sale you focus on, rather identify which of your products or services has the highest margins. Your data will tell you which products or services you should focus your sales efforts on this year, and which you should phase out, or simply terminate immediately.
3. Win more customers
You have a big budget for your lead generation, but invest more this year on optimising your lead conversion rate. No matter what industry you are in, or if you convert leads digitally or face to face, your ability to turn leads into sales is a potent leverage point to increase profits. For example, if you increase your conversion from 20% to 25%, that 5% increase in conversion will lead to a 20% or more increase in profitability (assuming your costs stay steady.)
4. Whittle down waste
One immediate way to see your bottom line improve this year is to keep a tight rein on your sales team giving out discounts and freebies, and on your production team’s unregulated wastage. You’ll be surprised when you add it all up how much profit you’ve lost this way. Set boundaries over what is and isn’t okay for your sales team to do during the sales cycle.
Rather create bonuses or value adds that they can add in that have high perceived value but low cost of goods sold. For example, you might offer two free training classes to a new customer when they buy a year’s subscription to your software service.
A training class has a high value, but likely costs very little to add more seats to the room. As far as your production team goes, if you haven’t already, you should invest in business software that tracks productivity in your team, as well as in your machinery and equipment, to improve efficiency and reduce wastage. This alone is worth the investment costs of the software.
5. Say ‘No’ to scope creep
Scope creep is when your customer alters the scope of your product or service after the initial agreement of work has been signed off, but with no alteration to the initial quote. It is excessively common and can be very detrimental to a bottom line in service businesses.
This year, be clear about what is and isn’t on offer in the quote, and if there are any adjustments down the road, inform the client upfront of these additional costs. Wait for approval before starting the work. Be clear about prices for common extras that clients may want and let them know you’d be happy to provide these additional items for them at these pre-agreed prices. This could also be an opportunity for gentle upselling.
With this in mind, may 2019 see your bottom line grow from strength to strength.