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2018 02 profit largeDo you want to become a multi-million-dollar business? Do you want to be more successful than your competitors and increase your net profit margins? Here are eight tips you can implement now that will boost your bottom line.

8 Tips to Improve Your Net Profit Margins in a Competitive World

Leads, Leads, Leads

Attracting the right prospects is huge.

Attracting the right prospects is huge. Maybe you've got a funnel in place for collecting leads, or perhaps it needs some work. If the latter sounds more like you, it's time to work on getting more visitors to your website or in your physical store.

In addition to trying to attract more customers, you need to focus on lead conversion. Lead conversion is the process by which you turn web traffic or inquiries into paying customers.

Doing this well comes down to knowing your audience and tailoring your sales and marketing efforts to their needs.

Doing this well comes down to knowing your audience and tailoring your sales and marketing efforts to their needs. Focus on sales training, on good content marketing, and a message the whole company agrees on.

If you're not on the same page, your customers will know. Improving in these areas is sure to lead to even a small increase that adds up over time.

Customer Acquisition

“Half the money I spend on advertising is wasted; the trouble is, I don't know which half.” – John Wanamaker, 1838-1922 department store magnate.

This is a critical. How much you are paying for customer acquisition? This includes the amount of money spent on marketing, hiring social media writers, sales salaries, and so on. Don’t know the total? You need to find out!

There's no definitive amount you should be spending, but answering the following two questions can help you figure out what's appropriate:

  1. What does it cost you to acquire a customer from each of your advertising strategies?
  2. What is the total lifetime (the length of time a customer continues to by from you) margin from the sales you make to that customer?

If the you are paying more to acquire a customer than your total margin from the customer you are paying too much. Keep it up and it’ll have a negative impact on your overall profit.

You'll also want to look at your number of referrals.

You'll also want to look at your number of referrals. Developing a referral program for your business takes some of the pressure off the marketing team and places the responsibility on your most loyal customers. Just keep in mind that you may need to put some incentives in place for this to work.

Velocity

Velocity, or the turnaround time from order origination until it arrives in the customer's hands, is good for all parties involved.

Velocity, or the turnaround time from order origination until it arrives in the customer's hands, is good for all parties involved. The faster this process is, the lower the overhead cost per each unit produced.

An increase in velocity requires you to take a closer look at all the processes at hand. What can you do to speed up the fulfillment process? Are there steps that you don't really need?

What can be automated?

What can be automated? What internal processes need revamping? We guarantee that there are some steps in your cycle, especially if you've been around a long time, that can be modernized.

How's the Upselling Going?

The more people buy at once, the better the profit margin.

The more people buy at once, the better the profit margin. Think about it: Bundling saves time, packing, money, and materials. If you can increase the number of items your customers buy at a time, you'll improve your margins, just like that! Basically, we're getting back to the issue of velocity: You're lowering your cost per sale by reducing overhead.

So, what can you do to encourage more spending?

Can you offer frequent shopper rewards, free shipping on larger orders? Can you add additional products or services at a reduced rate? Or, could you spend time advertising items that complement one another?

Get Rid of the Jobs that Lose You Money

Whether you're operating a huge corporation or a small startup, no one wants to lose a client.

But, sometimes we find ourselves doing business with certain customers that cuts into our net profit margins.

But, sometimes we find ourselves doing business with certain customers that cuts into our net profit margins.

Take your financials to a CPA and find out where your money is coming from and where you're losing. Cut the clients, products, or services that don't make a positive contribution to your bottom line.

The exception would be if you're participating in a social cause or working with a client you care specifically about. Otherwise, focus your efforts elsewhere.

In many cases, your best clients may be paying for you to work with the "worst" of the bunch.

In many cases, your best clients may be paying for you to work with the "worst" of the bunch. Keep this in mind and cut your losses, then put that money back into customer acquisition, sales, or marketing.

Work on Your Retention to Boost Net Profit Margins

What are you doing to keep clients making purchases?

What are you doing to keep clients making purchases? If you're a wholesale operation, be sure sales is following up with clients and fulfilling orders.

If you see that clients are dropping off, try to understand why.

If you see that clients are dropping off, try to understand why. Look for the drop-off point and see if there's a pattern that emerges. From there, it's time to come up with a plan that can help you retain customers.

Maybe that means you offer them a gift or spend more time on communication. Overall, keeping existing customers happy and ordering reduces your costs. With return orders, you're not wasting time and money courting new customers to replace the old ones and repeating the cycle.

Customer acquisition is expensive and time-consuming.

Getting a new customer is far costlier than selling to someone who is already a customer.

Getting a new customer is far costlier than selling to someone who is already a customer. Have your sales and marketing teams focus primarily on growth.

Let planned product promotions and discount strategies drive sales while your customer service team takes care of turning your existing customers into raving fans who are generating sales and sending you referrals.

Waste is Huge

Keep track of your waste.

Keep track of your waste. We're talking raw materials, finished product, lost orders, mistakes, and cardboard shipping supplies. Find out if quality concerns or overproduction caused the issue and fix it immediately.

Additionally, you'll need to get a better handle on forecasting.

Know how long it takes to sell your inventory and how much supply you need to keep on hand.

Know how long it takes to sell your inventory and how much supply you need to keep on hand.

Excess inventory can point to other issues, too. Particularly in the realms of sales and marketing. If inventory is piling up, you have to get to the root causes of the buildup. Is it an obsolete product causing the issue? Over ordering? Failing marketing strategies, a sales team problem?

Increasing inventory may be the “Canary in the coal mine” telling you danger is at hand.

Increasing inventory may be the “Canary in the coal mine” telling you danger is at hand.

Check Your Prices and Offers

Many companies rely on low prices and a barrage of expensive services and products designed to keep customers around.

You may be able to raise your prices by just 5 to10 percent without much ado.

You may be able to raise your prices by just 5 to10 percent without much ado. And across the full pool of customers, the small increases add up.

On the flip side, consider what you're offering your clients to keep them around. What little things can you get rid of?

Boosting Your Margins and Growing Your Business

In the end, there are many things you can do to boost your net profit margins. It's the combination of doing all of these things right – from customer retention, lead nurturing, and velocity, to keeping track of how much money and supplies you're wasting – that make more successful than your competitors and increases your net profit margins.

For more tips and more in-depth help on improving your margins and a fresh look at how to run your business better, get in touch with me and let’s talk about your challenges and opportunities. I promise, it will be time well spent and there is no pressure or cost. USA: 877.433.6225 feedback@focalpointcoaching.com

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