Six ways to improve your business bottom line
Businesses are under constant pressure. Rapidly changing marketplaces, new information, direct and indirect competition, employee turnover, operational costs, government regulations, general wear and tear –– and especially bad customers.
Adapting well to these challenges is not without discomfort or extra homework. Here are six fundamental ideas for clearing a new pathway toward higher-value, higher-profit customers:
1) OFFER HIGHER-VALUE, HIGHER-PROFIT RAW MATERIALS (OR TALENT).
Good customers with good money are out there. They simply expect better materials, better design, better people, better service, and a better environment to do business with you.
An interior designer might shift from bargain-functional materials and furnishings only, to offering luxury-chic decor that yields a higher commission. A restaurant might add high-end champagne or a fancy dessert wine to its menu, boosting after dinner profits if such splurges are in demand. A bookstore might carry a line of extraordinary new reading glasses, attracting more devout literary customers.
A design firm or restaurant (or any other business model) might also hire a world-class decorator or chef (or other dynamo) to attract new customers via better craftsmanship, service, or other high-value talent. The salon that hires the best hair stylist, the medical practice that hires the best doctor, the builder that hires the best architect or woodworker –– you get the idea.
How can your business improve its raw material and raw talent value?
2) OFFER HIGHER-VALUE, HIGHER-PROFIT TIMING.
This strategy is two fold. First, offer products or services during one or two of the most in-demand times that your business is currently closed. Second, offer deserving employees an afternoon off during one or two of the lowest-demand times you are open.
Obviously any schedule shift requires considerable analysis, yet our strategy firm is amazed at how many business owners align their working hours with their lifestyle, instead of their customers' lifestyles or work schedules.
Hypothetically (yet based on an actual client case), let us say that a dental practice researches and learns that Wednesday mornings are routinely their slowest and most frequently cancellation-prone period. An additional survey of patients indicates that Wednesday and Thursday evenings are the most highly desirable patient times outside current office hours.
Why? Busy executives cannot easily miss 8AM-6PM work, yet wish to get their teeth cleaned in time for the weekend.
Going forward, the dental crew may rest, workout, run errands, take a class, or do whatever they like each Wednesday morning –– because the Practice does not open until noon that day.
The crew agrees to work late two nights per week, so that newly offered appointments on Wed and Thurs evenings will carry a premium fee. All in, the Practice earns between 10-13% more profit each month, after an activity-based costing analysis.
When should your business close during normal business hours to save money, and open outside normal business hours to make more money?
3) OFFER A HIGHER-VALUE, HIGHER-PROFIT ENVIRONMENT.
Light facelifts to your waiting room, office, dining area, or retail floor need not be expensive. An improved environment simply requires a bit of planning, some downtime or overtime, and getting a few hands dirty during off-hours. Some carpentry crews are available from dusk until dawn, for a premium.
Fresh paint, refinished surfaces, improved signage, fresh decor, more comfortable furniture –– take a look around and make a list of afforded environment improvements that your customers or guests would appreciate.
Some business owners are even taking advantage of commercial real estate vacancies by moving into a better location for the same or less money, perhaps downsizing or expanding accordingly. If a prime location closer to high-value, high-profit customers were to come available, a site evaluation and relocation analysis may be a worthy homework assignment (with accounting and legal counsel in tow).
If your business could look a certain way, or be located in the most profitable environment, how or where would it be?
4) ESTABLISH A HIGH-VALUE, HIGH-PROFIT LIBRARY.
In my view, a "library" consists of any valid learning material: Books, lectures, training videos, online resources, even conferences.
No matter what business you are in, a "better library" educates your entire organization to perform smartly –– and removes almost any excuse for your team not knowing the best answer fully.
What industry intelligence is your organization missing out on, due to a weak or non-existent library?
5) ESTABLISH HIGHER-VALUE, HIGHER-PROFIT MARKETING AND PR EFFORTS.
Now that your raw materials and talent, operational schedule, overall environment, and brainpower have been improved, earmark a conservative percentage of future profits and make a powerful marketing splash at least once per year.
Via sharp editorial and online coverage, good-looking advertising and promotional materials, and white hat SEO and web development prowess, informing higher-value, higher-profit customers exactly where you are and what your business now does differently is an ongoing imperative.
Marketing and PR efforts do not have to be expensive or flashy, simply more informative to more high value, high-profit customers.
What would your exhaustive pie chart of customer segments look like?
6) DECLINE LOW-VALUE, LOW-PROFIT CUSTOMERS.
Customers that beat up your price, act awfully or irrationally toward your people, or otherwise disrespect your business's time or environment must be shown the door.
Develop a fair, profitable, and brief set of policies that explain what your business expects from good customers –– similar to modern HR manuals –– and then go to work serving good customers only, well beyond their expectations.
Good customers are the ones with good money. In my view, bad customers have everything you do NOT want and will NEVER need. Provide good customers only with better materials, better talent, better timing, and better information. Your organization will earn higher profits from higher-value customers and improve its bottom line substantially.
Baron Christopher Hanson is the founder of RedBaron Strategy and Goal Line PR, a hybrid consulting and advisory firm located in Charleston, South Carolina and Washington, D.C. Contact the firm via http://www.redbaronUSA.com/ or 843.641.0331 or [email protected]