On average, startups take about 3-4 years to break even and get into the profitable zone. If you aren’t there yet, you must know what it takes to boost profitability because it doesn’t come automatically. Even after break-even, it helps to stay persistent with best business practices to ensure your performance and profitability don’t decline. Read on for incredible tips on boosting your business’ functioning and proceeds:
- Upgrade your technology
The technology world is dynamic, and it’s easy to lag technology-wise. You must be on the lookout for technological tools that can benefit your business. For instance, if you’re a heating, ventilation, and air conditioning contractor, it’s wise to acquire robust HVAC Business Software to streamline your operations.
Such software revolutionizes how you draft estimates for upcoming contracts, send job quotes to potential clients, schedule and dispatch staff to various job sites, organize client information, and invoice customers for completed jobs. Harnessing suitable technology makes work faster and leads to better customer satisfaction.
- Refine your marketing strategies
Getting the word out there regarding your brand and products is critical. Staying mum is a death trap for your business because no one will know about your existence, so your sales and profit will remain low. Seek ways to reach your target audience with promotional messages they resonate with.
So, start by defining your ideal customer. Know their typical age, area of residence, income levels, cultural beliefs, likes, and spending habits. It allows you to write impactful promotional messages that can convert leads into customers. Moreover, focus on trending marketing strategies, like the ones below:
- Website search engine optimization (SEO): Setting up an online business site and optimizing it for search engine ranking significantly draws in leads to your business. Search results on the first page of Google get more than 90% traffic, so it’d help to claim that coveted spot for specific keywords.
- Social media marketing: Digital consumers spend more than 2.5 hours daily on social networks. Thus, you have a superb opportunity to engage your prospects.
- Short message service (SMS) marketing: About 75% of consumers like it when businesses send them promotional messages via SMS. Use this strategy and enjoy the whopping 82% open rate.
Besides the above, you may also want to try pay-per-click (PPC) advertising, email marketing, or video marketing.
- Rethink your pricing strategies
Pricing your products competitively ensures your revenue exceeds your expenses, leaving you with enough profit. You might have started your businesses with lowered prices to entice customers to your new brand. However, that shouldn’t go on for too long. Otherwise, you’ll be leaving a lot of money on the table. It might be time to change your pricing structure.
Factor the production costs, including the cost of raw materials, labor charges, and overhead like office rent, taxes, and utility bills. Then, add a reasonable margin of about 7 to 10% to determine a favorable unit price for your products. But this depends on your industry. It might be lower or higher than this range.
- Track key performance indicators
Analysis of your performance is critical. After defining your goals and rolling out strategies to achieve them, the next thing is to measure performance and compare it against the outlaid objectives. Examples of performance and profitability indicators are as follows:
- Sales by region
- The ratio of customer lifetime value to acquisition costs
- Number of customers
- Customer retention
- Employee turnover
- Employee satisfaction
- Percentage of defects
- Monthly website traffic
- Order fulfillment time
- Operational cash flow
- Average time for conversion
- Debt to equity ratio
The list doesn’t end here. You can track numerous performance and profit metrics, depending on your business sector. Some may need sophisticated formulae or software to compile.
- Outsource whenever possible
It’s not always feasible to hire a full-time staff to take on emerging roles in your firm. Employees are expensive to maintain, given you have to pay their regular salaries, insurance, taxes, office space and supplies, training, and paid leaves. A better approach is to outsource professional contractors, for whom you only pay a fixed fee for the services offered. Some tasks you might want to outsource include:
- Information technology (IT) support
- Content writing
- Customer support
Outsourcing is currently a norm among businesses due to its cost-saving advantages. Moreover, it gives you ample time to focus on core business needs like product development.
- Train your employees
Hiring a competent team member is never enough. The business world is dynamic, with numerous changes happening daily. Thus, skills acquired a year ago may already be obsolete. That’s why you must invest in continuously training your team members. Remember, they’re the face of your company. Customers probably interact with them more than they talk to you. Additionally, they manage critical business aspects like ensuring premium product quality and controlling production. Therefore, they must be highly skilled to fulfill their roles effectively.
Arrange regular training sessions to advance your staff’s skills in critical business aspects. Of course, it costs some money, but the return on investment is worth it.
- Retain your employees
Besides training, retaining your team members is critical. A high employee turnover negatively impacts your performance and profitability. For one, you’ll have to recruit new staff to replace the exiting ones, which is costly. Furthermore, the time spent replacing staff may cause you to lose sales opportunities and lag in production. Such inconsistencies project an ill image to your customers, further hurting your business. Thus, you’d want to adopt effective employee retention strategies like these:
- Hire the right fit for the position.
- Pay your staff competitively.
- Foster an inclusive workplace environment.
- Build strong bonds between team members to give a sense of belonging.
- Have flexible working arrangements.
- Organize regular team-building sessions.
- Convince employees to believe in your brand.
- Provide unparalleled professional development opportunities.
By making your employees feel valued, they wouldn’t want to leave your firm for others.
Despite the tough competition and typical challenges in running businesses, it’s still possible to elevate productivity and profitability. It’s about knowing the areas to work on, like customer satisfaction, marketing, pricing, and employee retention. By following the tips suggested herein, you’ll gradually see improvement in your business in terms of sales and profit.