When you start a business, of course your mind goes straight to profitability. And once that profitability is there (which might not happen for a few years), the best businesses will always look to reach new heights of profit and success.
If you’re a small business, being profitable is particularly tricky. That’s why we’ve created a list of ways to improve your profitability – no matter how big your business is.
5 Simple Ways to Improve profitability
Review Your Prices
Nobody wants to have to increase their prices, but sometimes it’s necessary. Manufacturing costs can really fluctuate and as such, you might find your original price no longer gives you as much profit. Increase prices can easily and quickly fix that. Although, depending on your product and quality, you may miss out on a few sales if you make prices too high. It’s all about finding a balance that will work for both you and your customers.
When choosing new pricing, be aware of what your competitors are doing. Are they finding a cheaper supplier and therefore offering lower prices? Or, are their prices in line or higher than yours?
Encourage Upselling or Cross-Selling
This should help you increase sales and average basket value. Upselling is when you encourage your customer to upgrade their current product, or a product they’re interested in. This is something that works wonders for Apple when releasing new phones.
Cross-selling involves pairing two products together, or adding a ‘other products you may like’ to product pages. This gives you a chance to promote other items to the customer that are relevant to their current order. For example, cross-selling notepads with coordinated pens, or paintbrushes with paint. By predicting other items your customer might need, or taking a look at the products commonly bought together, you can create a cross-selling strategy that boosts profitability in no time.
This probably sounds easier said than done, and will take some serious consideration. Profitability in this form can be pretty cut throat, and may lead to letting staff go, cutting ties with manufacturers for cheaper prices elsewhere, or moving office space for lower rent. By taking a look at your monthly outgoings and expenses, you can start to highlight any areas that aren’t adding value to your business or customer. These can easily be removed from the process to help keep overheads low.
Offer store credits in replace of refunds
One of the costliest areas of a business is returns. Not only do you have to pay to ship the item back to your office, staff will have to take time out of managing other sales to restock the product, and you’ll also have to provide a refund to the customer. All in all, you’re losing out on money, time and stock (as some returns won’t be re-sellable).
Using ReturnGO, you can handle returns with store credits. The app – which is integrated into your store to work alongside your standard returns policy – will work with the customer to understand why they want to return the item, and provide them with a calculated amount of store credit if they keep the item, donate it or return it at a later date. This is a great way of increase profitability, as you won’t be losing money, and the customer is encouraged to spend more in your store.
Build a point-based loyalty scheme
Everyone loves perks. And customers love being rewarded for their shopping habits. By creating your own loyalty scheme, not only are you giving back to the customers who support your business, you’re also adding a spend incentive.
Customers will have to reach different numbers of points to unlock better perks. A low point tier would be free delivery or a discount on their next order, while a high tier might include a voucher or even access to exclusive collections or events.
The better the incentives are, the more customers will be looking to spend so that they can reach new levels.
So, there you have it. These simple ways of improving profitability are easy to implement and will start working in your favor straight away.