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2016

Loyaly-Thumb.gifFew small business owners would question the value of having loyal customers. But did you know just how great an impact customer loyalty--or lack of it--can have on your bottom line? For instance, increasing customer retention rates just 5 percent can  increase profits anywhere from 25% to 95%. Read on to discover how else customer loyalty can help your small business continue to grow and thrive.

 

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There are all sorts of ways that business owners measure success. It could be the number of units sold, the amount of seed capital raised, increases in website traffic, more conversions, increased buzz about their business, or any other number of things.

 

In the end, there is only one real measure for success in for-profit businesses: profit. After all, if you don’t make a profit, no other metrics matter. Profit is a simple concept in theory – it is nothing more than the difference between your wholesale costs and your retail revenue. However, there is nothing simple about it.

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More specifically, the variance between what it costs you to buy or make a product and what you can eventually sell it for is called your profit margin. Ideally, that will be a fairly big number, expressed as a percentage. For instance, if you can buy a widget for $3 and sell it for $5, your profit margin is a healthy 40% (you make $2 on every $5 sale, 2/5 = 40%).

 

Some businesses, like restaurants or discounters for instance, typically have a very low profit margin (in the single digits). They make up for a low margin with volume sales. Other businesses sell less, but at a greater margin. Either way, the question almost all small business owners have, whatever their margin may be, is how can they increase their profits?

 

Here are three ways to increase your profits. They are:

 

1. Increase your prices: No, you probably don’t want to raise your prices, but take a look at the big picture: People are your customers for all sorts of reasons. There are things you do as well, or better, than your competitors. It might be your:

 

  • Location
  • Prices
  • Products
  • Value
  • Convenience
  • Selection
  • Expertise
  • Reputation

 

You will notice that price is only one of many different things mentioned in this list. The reason is because, unless your essential value proposition is that you are the least expensive (which is unlikely), then people choose your business for many reasons, price being just one.

 

Overall, while no one likes raising prices, and the fear of losing customers as a result of a price hike is a legitimate concern, it is equally true that all businesses raise prices. Consider this: When was the last time you stopped patronizing a business simply because they increased their prices? Right, that doesn’t happen very often.

 

Click here to read more articles from small business expert Steve Strauss

 

So, if you want to make more money, and especially if you want to increase your profit margin, then consider charging more for your products or services. If you are still worried that it will turn-off your customers, test the new prices first before rolling them out across the board.

 

2. Sell more: If you don’t want to increase your prices but still want to increase your profits, then your second option is simply to sell more. Selling more means you will make more. Yes, this is self-evident, but it is also a fact.

 

One way to do this is to do an 80-20 analysis. The 80-20 Rule states that 80% of your profit (or sales) come from 20% of your products or from the top 20% of your customers. So the question to answer is this: What are your top 20% products? Who are your top 20% customers? That small percentage of products and customers account for the vast majority of your sales.

 

Once you know the answer to that, then the path to more sales should be evident: Concentrate on those sorts of valuable products, find more of that type of customer, and you will make more sales that will make you more money.

 

3. Decrease your overhead: Think again about that profit equation I mentioned earlier: Profit is the difference between costs and sales. The first two ways to increase profit have to do with increasing sales. The other way relates to the first part of that equation – decreasing your costs. Selling the same amount at lower costs yields increased profits.

 

The challenge is figuring what to cut, and then how to cut it in such a way that it doesn’t eat into sales. Cutting overhead must be done with a scalpel and not a cleaver. Be judicious. See if you can find a cheaper supplier, or if you can reduce labor or insurance costs. Buy in bulk. Give employees an incentive for keeping costs down.

 

Increasing your profit is certainly possible, but it will require keeping close tabs on your margins and finding ways to alter the profit equation to your advantage.


About Steve Strauss

Steven D. Strauss is one of the world's leading experts on small business and is a lawyer, writer, and speaker. The senior small business columnist for USA Today, his Ask an Expert column is one of the most highly-syndicated business columns in the country. He is the best-selling author of 17 books, including his latest,The Small Business Bible, now out in a completely updated third edition. You can listen to his weekly podcast, Small Business Success, visit his new website TheSelfEmployed, and follow him on Twitter. © Steven D. Strauss.

You can read more articles from Steve Strauss by clicking here


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

Local_body.jpgBy Robert Lerose.

 

According to a recent survey by Yodle, nearly half the respondents said that they expect to use local businesses more often in the next year.

 

As more consumers patronize neighborhood businesses, local merchants can take advantage of the trend with effective marketing strategies. Instantly, an international firm that provides consumer insights tools for researchers and marketers, has these tips for attracting more customers in your community.

 

1. Become knowledgeable about who your audience is.

Gathering information about your customers and prospects can help you target your marketing campaigns more accurately, come up with the right kinds of offers, and provide the products and services in your niche that local consumers want. You can begin by collecting basic demographic information, such as the age range and gender makeup of typical customers. Try to find out about their interests or what goes into a buying decision. Conducting a survey, either in-store or through a mobile device, and perhaps offering a small incentive for participating, should yield a higher response and a trove of revealing details.

 

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2. Be part of local search engine results.

Smartphones and other portable devices have increased the number of local online searches, with no indication that the trend is slowing down. Local businesses need to appear on the first page of local search engine results to grab prospects' attention. Refreshing your website and adding new content regularly is a good way to appear high in the rankings. Google Places, Bing Places, and Yelp have shown to be popular places for this kind of brand building.

 

3. Take an active role in your community.

Business owners who get involved in the local scene demonstrate a strong commitment to their neighborhood and customers. Register with the local chamber of commerce and see about leveraging the knowledge and experience of existing members. Attend local events or consider sponsoring one. Reach out to fellow entrepreneurs in your community to see if there are opportunities to work together. Word of mouth is still one of the most powerful ways to draw attention to you and your business, especially in local neighborhoods.

 

4. Try location-based marketing.

Location-based marketing sends information to customers and prospects when they enter a specific location, such as a block from your store. Consumers who opt in can receive alerts or text messages on their smartphone or portable device from your business. These can be offers for an on-going sale or a time-sensitive message. For example, a deli that wants to increase lunchtime traffic could offer a discount on any cup of soup bought between 12 noon and 2p.m.

 

Using a combination of online technology and offline participation can help you ride the wave of local customer shopping and increase your business.


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

 

Bank of America, N.A. Member FDIC.

 

©2015 Bank of America Corporation

 

 

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