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2018

Make More Money.jpgYou've probably heard that it costs about five times more money to acquire new customers versus retaining existing ones. Obviously, the expense and effort of acquiring new customers can be worthwhile. That said, are you doing everything that you can to maximize profits based on your current customer base?

 

Your customers already value your product or service, so it’s extremely cost-effective to try to get them to buy more from you. Follow these 5 tips to get more from the customers that you already have cultivated.

 

1. Add higher revenue and margin items to your offerings.

Whatever products or services you offer, you probably can add some extras that provide greater perceived value to the customer while maximizing your profits.

 

There's a reason why fast-food chains ask, "Do you want fries with that?" With a profit margin of around 75 percent, they are probably the most classic example of high-margin product add-ons. Your sales staff can easily increase profits by forming the habit of offering an extra pack of batteries or other related items when they sell electronic devices or a yearly website audit when creating a new website. So, when customers and clients make a purchase, have related products and services to suggest.

 

2. Incentivize more frequent purchases.

Sometimes, regular customers will buy your products or services more frequently if you just remind them that you're out there. For example, when a personal trainer calls customers to suggest that more frequent visits will help them reach the fitness goals that they've nearly achieved, the extra business can be significant.

 

Don't forget the value of loyalty programs, either. Caffeine-driven customers often stop by more frequently to get their cards punched when a free latte is in the offing. As a small business owner, you know your customers well. Target their current buying habits and untapped potential to identify the incentives that might encourage more sales.

 

3. Clear low-margin products from your sales offerings.

Are all the products that you sell profitable enough? By necessity, you may need to devote some shelf space or service offerings to certain products and services that customers demand — or items like parts that support higher-profit items. But, when the acquisition, storage or performance costs don't justify selling certain items, maybe it's time to just say no.

 

Keep in mind that the real profits might reside with small companion products rather than the larger purchases. Think about the new battery-operated TENS device sold for pain relief. You might sell a device one time for about $100, which may represent a relatively moderate margin. But the repeat-purchase of required electrode pads, batteries and other parts typically have high margins. This can turn one-time customers into guaranteed, repeat high-margin sales opportunities.

 

4. Beat the competition and raise prices.

Knowing your competition is not just about staying within the pack. If you know what they do — and how well they do it — you may find that you do it better. Whether you advertise your company's superiority or if your customers already recognize it, they may willingly pay a premium price to continue buying the best.

 

5. Vigilantly watch the expense side of sales.

Organic growth is vital to every company, but this doesn't mean that costs aren't important.

 

It's all about the margins. Perhaps, you can shave dollars off regular parts purchases by finding a new vendor. Or, if you have the available space for extra inventory, consider buying in bulk. If you can get comparable delivery and the same quality, these savings go directly to your profit margins.

 

Don't forget to look at processes and personnel. How much do you spend on unnecessary steps in product or service development? And, are you paying a high-priced employee to do work that can be performed just as well by an entry-level person? The cost savings of a tight operation translate into more money for your business without raising prices or adding more customers.

 

Take full advantage of all earnings opportunities.

Every business should continuously examine ways to sell more products or services. However, small businesses in particular need to keep a sharp eye on available resources before taking the steps needed to sell to more customers. Make sure that you're not leaving money on the table that can make a real difference to future growth.

 

 

About Carol Roth

 

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Carol Roth is the creator of the Future File ® legacy planning system, “recovering” investment banker, billion-dollar dealmaker, investor, entrepreneur, national media personality and author of the New York Times bestselling book, The Entrepreneur Equation. She is a judge on the Mark Burnett-produced technology competition show, America’s Greatest Makers and TV host and contributor, including host of Microsoft’s Office Small Business Academy. She is also an advisor to companies ranging from startups to major multi-national corporations and has an action figure made in her own likeness.

 

Web: www.CarolRoth.com or Twitter: @CarolJSRoth.

You can read more articles from Carol Roth by clicking here

 

Bank of America, N.A. engages with Carol Roth to provide informational materials for your discussion or review purposes only. Carol Roth is a registered trademark, used pursuant to license. The third parties within articles are used under license from Carol Roth. Consult your financial, legal and accounting advisors, as neither Bank of America, its affiliates, nor their employees provide legal, accounting and tax advice.

When managing a small business, owners will say cash is king. Or, as Zeynep Ilgaz will tell you, “cash is queen.”

 

Ilgaz, founder and CEO of Confirm Biosciences, Inc., started her business, as many small business owners do, with her own funds – in her case, $2,500.  Getting from there to the $14 million revenue business she leads today was an exercise in cash management that took a very disciplined approach.

 

“When we started, we were laser focused on managing cash,” Ilgaz said. “Our philosophy was that if we didn’t have cash, we didn’t have a business.  So we implemented strategies to bring cash in as fast as possible and slow down paying cash out.”zilgaz.jpg

 

Confirm Biosciences is a worldwide provider of substance abuse and health testing products and services.  Managing cash flow meant keeping costs to a minimum.  The company initially started online and didn’t carry inventory.

 

“We drop-shipped product and required payment upfront.  We would collect payment by credit card or wire transfer to reduce risk, and we eventually leveraged a line of credit to help manage cash flow,” Ilgaz explained.  “We also worked with our suppliers to extend payment terms, which allowed us to be in control of cash outflows.”

 

“Our mentality was always to get cash in advance to pay for our growth and cover costs.”

 

The strategy worked.  In 2008, when the company started, Ilgaz and her husband occupied a small, 1,000-square-foot building.  It was just two people  and one big dream.  Today, 10 years later, the company resides in a 23,000- square-foot facility in San Diego County, employs over 50 teammates and sells product worldwide – both on a wholesale and retail basis.

 

“I get asked if there was a defining moment in my business that really set the course of our success,” Ilgaz said.  “I think there are several important factors – first, be honest and transparent, and represent who you are, and then have a mindset of being flexible and able to adapt and change.  We have always maintained the philosophy that managing cash is the most important strategy, and that lens helped us to continue to look for opportunities to increase control over cash.”

 

Today, Confirm Biosciences warehouses its own inventory, which allows the company to maintain tighter control over quality, execute faster, and reduce the administrative costs of working with third parties.

 

“I also advise small business owners to organize a Board of Advisors, which is different than a Board of Directors,” Ilgaz explained.  “Our advisors have helped provide critical coaching and mentoring.  For example, when I made a presentation to Walmart, one of our Advisors was a very powerful CEO and able to provide invaluable insight on how to pitch and approach a large retailer, and this guidance helped us win this contract.”

 

The importance of managing cash is a frequent concern expressed by small business owners. It is a recurring theme that appears in small business surveys, including the Bank of America Small Business Owner Report.  “Strong cash management means leveraging forecasts to manage cash, and always knowing what your cash needs are throughout your operating cycle,” Ilgaz said. “Maintaining good relationships with vendors, suppliers, creditors and your banker can help a company establish terms to help manage cash flow needs.  We knew, for example, that the move into retail meant we would need more cash, and that the margins would be tighter than wholesale.  Timing became that much more critical, and the increased focus on cash management that much more important.”

 

Another best practice for small business owners to consider is to remain connected with nonprofit organizations that support small businesses, and provide a forum to share ideas and experiences.  One such organization is the National Association of Women Business Owners, or NAWBO.  “Be willing to reach out, listen to the experiences of others, and be open to change,” Ilgaz said.  “The relationships you build with other business owners and leaders can help you gain insight into your own opportunities.  All great companies start with great relationships with others.”

 

 

 

Bank of America, N.A. provides informational reading materials for your discussion or review purposes only. Interpretations in this release are not intended, nor implied, to be a substitute for the professional advice received from a qualified accountant, attorney or financial advisor. Neither Bank of America, its affiliates, nor their employees provide legal, accounting and tax advice.

 

 

About Karen Harrison

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A 25-year banking veteran, Karen has held senior executive management positions at leading financial institutions prior to joining Bank of America in 2011 as the Small Business Banking Manager for San Diego, Imperial and South Riverside counties. During her tenure at Bank of America, she has also served as a National Sales Performance Manager for Small Business and Market Manager for the Small Business Client Management team for the West Region.

 

Karen is actively engaged in the community and is a recipient of the Global Diversity and Inclusion award at Bank of America. She currently serves as the Executive Sponsor for Bank of America Community Volunteers/San Diego Market, Chairman of LEAD for Women, San Diego Chapter, as well as serves on the Board of Directors for LEAD San Diego, Junior Achievement of San Diego, and the National Association of Women Business Owners (NAWBO) San Diego Chapter, the Women’s Leadership Council for the United Way, and the California’s Women Leaders Network at Bank of America. She is a former Big Sister for Big Brothers/Big Sisters of America. An honors graduate, Karen holds an MBA from the University of Phoenix and a BA from California State University, Fresno. Karen is married, resides in San Diego, California, and has eight Godchildren.

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