As a business owner, you know that acquiring customers is hard. Very hard. You start out spinning your wheels searching for a repeatable customer acquisition channel and, when you finally find one, you discover that it is not as repeatable as you originally hoped. You have exhausted your current network by already signing up all that could benefit from your product. Your current content marketing needs continually increase and creating new content takes time. You find that in business there are no easy wins.
What if I told you that you can increase your profitability without winning any new business?With this guide, we are going to cover a few ways in which you can make your business more profitable as it stands today, both by saving time (one of your largest assets) and by increasing revenue.
With this guide, we are going to cover a few ways in which you can make your business more profitable as it stands today, both by saving time (one of your largest assets) and by increasing revenue.
Sell more to current customers
The obvious path to greater profits without signing up any new customers is to sell more to your current customers. The metric for this is called lifetime value (LTV) or customer lifetime value (CLV). You can calculate a rough estimate of it as the monthly income (revenue – expenses) of your average customer by the average number of months somebody is a customer. (The actual formula involves calculating a retention rate and making a discount rate assumption.)
The two ways to increase your LTV are:
- Increase the amount of income per customer
- Lengthen the amount of time that somebody is a customer
Let’s focus on the first one. Here are some ideas on the additional value you can provide your current customers with (and charge for).
- Training (Employees are a huge expense for your customers so they will pay for them to be using your service efficiently.)
- Higher level of service (Telephone or onsite support, a quicker response time, dedicated support representative, etc.)
- Customization (If your service provides 90% of what a customer needs they will sometimes pay handsomely for that last 10%.)
- New products or services (Upsell the customers that are getting the greatest value from your service.)
Many business owners resist raising prices because customers HATE when prices increase. Technology (consumer electronics, web hosting, etc.) might be the only industry where prices decrease over time with more customer adoption allowing production to scale. Every other industry tends to have prices increase over time. Your utility bills go up, the price of visiting the doctor increases, automobile prices increase, and tuition skyrockets.
Your prices can increase too.
The simplest way is to only increase prices for new customers as you do not risk alienating your current customer base. However, some of your oldest customers–the ones that have received the most value from your business–might be open to paying more, as well. They have a vested interest in your success.
Annual billing can actually have a negative effect on your profitability but can be an important component of cash flow, so we are going to cover it here. Typically, customers get a bit of a discount if they pay for a year of service up front rather than month by month (e.g. pay upfront for the year in the price of ten months; thus, getting two months free). So, if you do offer a discount, you are reducing your per-customer profitability in order to increase immediate cash flow which you can use for growth initiatives.
You do not have to offer discounts, though. Depending on your business you can make annual contracts standard and only offer month to month billing for those that ask (and charge more for that option). Depending on your churn rate, this can result in higher profitability.
You have definitely heard the following saying:
Time is money.
When you are a fresh entrepreneur with a brand new business you often have more time than money. However, as your business matures you learn that distractions and busy work have an effect on your bottom line in two ways. The first way is that there is a cost to your time. For the same amount of money that you take out of the company (either via payroll or profits) the number of hours you spend to make that amount of money is how profitable the business is for you.
Fewer hours spent working for the same results = more profitable
The second way that the time spent on your business affects your profitability is that those distractions and busy work take your time and focus away from building your business. Ultimately that is what is going to make the biggest difference over the long run.
Let’s identify the things you do not like doing and find a way to not do them!
Great systems liberate you from the grunt work of your business and allow you to spend more time working on the things that will help you grow it whether that be marketing initiatives, sales, or developing new products. Systems take the guess work out of any repeated process and, when created correctly, can be automated or can be outsourced by hiring somebody else to perform the tasks for you.
The first step in saving time is figuring out what you are spending it on. (This is also the first step for saving money if you are looking to do a budget for your business.)
Spend this week thinking about the things that you do more than once. That might be on-boarding new customers, checking the status of orders, sending out invoices, customer support, or a wide variety of other things.
First, pick a method for documenting your processes. That can be a piece of paper, a Google Sheet, an internal wiki, Evernote, or task management software such as Asana. Pick what works best for you but eventually, you are going to want to share these processes with others and track their progress. So, some sort of project management solution is what you will ultimately graduate to.
Now, whenever you find yourself doing something for the second time this week write it down as the name of the process (e.g. process expense reports). Under the process, record each step that you go through to complete it. For processing expense reports this could be:
- Check that all required information is on the expense report and that it is signed.
- Look at each transaction and ensure that it is covered by the expense policy.
- Make sure that there is a matching receipt for each transaction.
- Approve report.
- Scan expense report and receipts and save in Finance folder.
- Email approval to the employee.
- Write check to the employee to reimburse for expenses.
- Deliver check to the employee.
- Record check in bookkeeping software.
That is a lot of steps for a simple expense report. Now that you have them written out you can find ways to optimize. Maybe require the employee to scan the expense report and receipts and submit them to you electronically? Instead of writing and delivering a check maybe you can add it to payroll? Or print it from the bookkeeping software so you write the check and record it simultaneously?
You will likely find that some of your processes, have a few steps that can be eliminated as they have been built up over time and things are done because “it has always been done that way”. Having it documented allows you to identify areas that this is the case.
After documenting all of your processes and looking at steps that can be eliminated we can turn our focus to steps that can be automated which can save a few minutes here and there that add up to quite a bit of your day.
Many of us use a lot of different online applications as part of our day to day business functions. We might use one system for customer support, one for sales, one for email marketing, one (or many) for social media, and use Google Apps all sorts of back office work. IFTTT and Zapier are two online platforms that help automatically pass data between all of the web apps that we use and can help automate some of the steps of the processes you created.
There are a lot of tools available to business owners that help them streamline and automate their marketing efforts. With Buffer you can schedule your social media posts and post across all of the social media platforms from one app. Drip helps you build a mailing list and convert your subscribers into customers by using segmentation and automation to deliver personalized content to each subscriber at specific points in the sales funnel.
If your business utilizes outbound sales then there are countless CRM platforms that you can use to create and automate, as much of the process as possible. There are likely even a few CRM platforms specifically developed for your industry. The best ones make is easy to schedule calls, dial, leave voicemails (called voicemail drops), and send emails based on templates. They should do all of that and then get out of your way. Great CRM software will pay for itself many times over with the right salesperson.
Invoicing and billing are not activities that push your business forward but they are critical functions that ensure you have the cash flow to grow. Using Elorus will make the billing and invoicing process easy!
Since we mentioned automated processes above, you will be happy to know that Elorus can automate your invoicing with its “Recurring documents” feature. You can create rules and the application will issue sales and purchases invoices automatically, saving you both time and your peace of mind!
Another exciting feature has to do with the seamless collaboration between you and your partners. Your employees can have access to your company’s organization in Elorus so routine tasks can be completed with you having a real-time monitoring of operations. And your bookkeeping just got a lot easier, as well! Give access to your accountant so they can download your records in a few clicks, without having to deliver them paperwork or any further communication.
Turn time into dollars
No matter what your business is, there is probably a slew of tasks that you wish you did not have to do so that you could spend more time on other activities such as customer development or activities outside of work. Saving time, in conjunction with increasing customer lifetime value, provides you with the ammunition needed for your next business breakthrough.
About the author: Will Johnson loves helping others succeed and is currently helping bootstrappers grow their businesses through marketing. You can read more at The Underdog Marketing Blog.