Profit gives you power…
The power to attract, wow, and acquire a client. It determines how bold and aggressive or timid and constrained you are in reaching out to new customers and creating brand identity and awareness.
Profit affects your ability to keep clients and multiply them because it determines how well you can serve and satisfy clients–which affects retention, repeat business frequency, and referrals.
Plus, profit affects how well you can incentivize and compensate staff to attract and keep the best employees and management.
Profit also gives you the power to eliminate fear because whether you are profitable determines if your business can survive temporary adversity, be that a temporary bump such as not being able to replace your top producer for six months or a more serious one, such as facing a recession lasting sixty months.
While there are many ways to increase your profit including increasing efficiency and reducing expenses, here are four simple ways to increase your profit which require little work:
1. Raise your prices. The fastest and easiest way to increase your profit is to simply raise your prices. While many businesses are hesitant to raise their prices, often when they do, they find there is little fallout. Plus, between the lower operating costs from what little fallout there is and increased fees, they come out ahead. For example, let’s say you have 30 clients paying you $1000/month or $30,000 per month. If you raised your prices 25% to $1250/month and lost 10% of your clients because of the increase, even with the fewer clients, you’d still be making $33,750 per month.
To raise your prices, go through your list of products and services. Which ones have remained unchanged in price for one year, two years, or more? Consider raising your prices by 5% or X%. Or you could just raise the prices by 5% or X% for just your new customers.
2. Offer premium options. Rarely, if ever, should a product, service, or offer be presented without pricing options, tiered pricing, or both.
Putting out one price and yes/no offers leaves money on the table and does not satisfy what customers want.
When it comes to premium options, no less than 5% and often as high as 20% of consumers will always opt for the “better or premium option” or ascend to the higher price tiers. This often has more to do with who they are than the offer you make. They just want the best because that’s who they are and what they do.
So, if you are hesitant about raising your prices, figure out a way to add a premium choice.
You should see between 5% to 20% taking the premium offer. If you find that more than half are taking the premium offer, that is an indication that your lowest offer is too low. In that case, make your premium offer your new low offer and create a new premium offer.
Creating a premium offer can be done in several ways. For example, you can add something extra to the premium choice and/or remove something from the lower offer and move it to the premium one. Ask yourself if there is a way you can help your clients achieve something faster or how you can customize your product or service to justify premium access.
3. Upsell. Another way to instantly increase profit is to offer an upsell.Look at your product and service offerings. Is there something you already offer that can be included as an immediate upsell? Do you have any way to create a membership plan? Can you offer an extension such as an extended warranty or premium guarantee or additional assistance in the set-up of a new office?
4. Stop competing on price. Excessively worrying about what others are charging and competing with your competitor’s lower prices will get you in trouble and hurt profits. While this fourth strategy won’t be as fast and easy as the other three mentioned above, it is none-the-less critical and worth your time.
It’s important to look at your numbers. Knowing things such as how much it costs you to acquire a client, what your client’s lifetime value is, what your costs are, and so forth is much more important in determining how much you should charge.
Instead of competing on price, concentrate on how you can eliminate price comparisons with your competitors so there are no “apples to apples” comparisons when prospects are looking at whether to buy from you or someone else.
Stop selling products and services and start selling SOLUTIONS. Reconfigure your marketing to focus on solution-selling. Highlight the solution (and your expertise) with a book, reports, or a podcast.
As mentioned, there are other ways to improve your business’ profitability, however concentrating on these four ideas first can be a much faster way to increase your profitability without requiring tons of time. You can even implement these immediately, which will give you the stability and peace of mind you need to achieve all your business goals and plan for growth.