Business owners and executives have two levers to choose from in attempting to boost their bottom lines: increasing sales or decreasing expenses. Whether they decide to pull either one of these — or both — management needs to have a handle on the current sales breakdown between product lines and customer segments and the expenses making up the bulk of costs.
How to increase sales
The following tactics can help a company better position itself to sell more to current markets and expand to new markets:
- Work more closely with current customers. A cost-effective way to lift sales is by strengthening and expanding the company’s relationships with its current customers. After all, they presumably are satisfied with the products and services they’re currently receiving so are likely to be willing to try others. Ask about their needs, listen to their responses and identify ways the company can address them.
- Partner with other sellers. A company that isn’t in a position to produce complementary products or services (see “Add complementary products or services”) can look into partnering with a firm that has the capacity to do so. Another way to enlarge a company’s potential market is to seek out distributors, wholesalers or other agents in a strong position to sell its products.
- Leverage social media. Social media can be a cost-effective way to highlight specific products or services, often with a relatively nominal investment of time. Of course, social media promotions have to be handled carefully — customers are apt to be turned off by a barrage of posts that loudly shout, “Buy this!”
Many experts recommend alternating posts that focus on specific products with those providing information of value to followers and fans. For example, a cybersecurity firm might offer guidelines on keeping information safe online.
- Play with pricing. While increasing prices may boost revenue, scattershot price jumps can prompt customers to go elsewhere. But it’s possible to design a pricing strategy that boosts revenue without simply slapping on higher price tags.
One option is to bundle products or services and then offer the group at a price lower than what customers would spend for each item individually. Customers enjoy saving and the company boosts sales, often with minimal additional sales effort.
Another way is to offer a subscription service. Customers ensure steady access to the products or services they need, while the company gains an ongoing source of income.
How to decrease costs
Several tactics can help businesses rein in costs. They can:
- Identify top suppliers. Many companies find that just a few of their suppliers account for most of their spending. By identifying these vendors and consolidating spending with them, they’ll be in a stronger position to negotiate volume discounts. Similarly, some industry associations offer bulk purchasing prices. Consolidating a supplier base also often streamlines the administrative work associated with purchasing.
- Go green. The environmental mantra of “reduce, reuse, recycle” can save money as well as the environment. Refurbished computers or office furniture often can be found at substantial savings compared with their brand-new counterparts.
Once a business no longer has a use for a device or piece of office furniture, it might be able to make a few dollars selling it to liquidators, dealers or others. Even giving the item away can reduce its waste removal expense.
In addition, rather than run heating or cooling 24/7, a business can use timers to turn off the HVAC system at the end of each workday, turning it on shortly before the next business day begins.
- Know when to outsource or deploy technology. It can be tempting to try to save money by doing everything internally, from updating the company’s website, to processing payroll, to repainting the office break room.
While this might mean fewer out-of-pocket costs than hiring an expert, taking on projects the company isn’t equipped to do diverts time and energy from the initiatives that differentiate it from competitors. Similarly, wise use of technology, such as accounting applications or CRM solutions, can free up time, provide valuable information and reduce errors.
Sustained growth and profitability
Sales growth and expense control requires continual creative and critical thinking. Both management and employees need to question how things are done, look for ways to improve, and implement the changes likely to improve operations. Doing so will help organizations leverage economic upturns and weather the downturns for sustained growth and profitability.
Sidebar: Add complementary products or services
Strategically expanding the company’s product or service lines can bring in more revenue. Before adding new items, consider your business’s mission and identify products or services that logically fit within that mission. These might be products that complement the ones the business already offers — for example, a landscape architect might offer lawncare products — or that require similar expertise or equipment.
Some businesses can profit by adding items that fit into their down periods. For instance, a company that sells snowmobiles in the winter could also sell jet skis in the summer.
Before making a decision to expand your product line be sure to assess the related costs. You’ll want to ensure that you can realize your desired profit margin.