Your company’s sales can drop for a number of reasons. You might own a seasonal business that sees lots of activities during certain times of the year and a significant decrease in sales for the rest of the time. The state of the economy could be keeping customers away. Whatever the cause of slow sales, you might be looking at your bottom line and wondering what you can do to pull your company out of a slump or to increase profits. While getting more people to buy your products and services will go a long way towards boosting your profits, there are other things you can do to increase your profits during a slow period.
When it’s difficult to sell more, you can raise your profits by selling a smaller volume of products or services for a higher amount. You do not need to increase the price of your services or products by a lot to see a notable difference. Data from McKinsey suggests that a 1% increase in price typically leads to an 8.7% increase in profits. Most customers aren’t likely to complain about a 1% price increase, either. In fact, depending on the product or service you offer, many loyal customers aren’t likely to complain about a 5% or 10% increase, as long as your company continues to provide something of value.
It costs less for companies to retain existing customers than for them to pursue new ones. One way to encourage repeat sales and to get customers to come back, again and again, is to reward their loyalty. A loyalty program can take several forms. You can track customer’s purchases and offer them a reward or discount after they’ve bought a certain amount or have made a certain number of transactions. Another option is to introduce a referral program. If a customer tells someone else about your company and that individual or business buys from you, you can reward the customer with a gift card or by offering them a small cash payment.
Be Wary of Discounting
When sales are slow, it can be tempting to lower the prices on your products. Discounting can encourage people to buy and can lead to an increase in sales. But it also trains customers to wait for a sale or special offer before they purchase from you. When people only buy what’s on sale, you miss out on getting the most profit from your products or services as possible.
Instead of desperately slashing prices when the stock doesn’t seem to be moving or when no one has called about your services for several days, think about the value your business is providing to customers. Highlighting the quality of your service or product rather than its low price can help convince people that it’s worth paying full price for.
Stay on Top of Accounts Payables
Not all methods of increasing profits focus on customers and pricing. Ensuring that your company pays its bills and invoices on time can also lead to an increase in profit. For example, Company A sends your business an invoice for a service it performed for you. The invoice is due in 30 days. After that, a 5% late fee will be added. It’s worthwhile to pay the invoice on or before the due date, as doing so will help you avoid the late fee. Since you’re spending less on Company A’s services by avoiding the late payment penalty, your company will see a slight increase in revenue and profit. Keep up the habit of paying on time and you’ll continue to see your profits grow.
Paying on time also helps to strengthen your relationships with your vendors. A vendor that looks at your business as timely and loyal is likely to offer you a reward or discount for your continued loyalty.
Find a Way to Pivot
A sales slump can turn out to be a growth opportunity for your company. If what worked in the past no longer does, finding a new way to approach things can help to increase your revenue. For example, you might find that switching to an online sales model, rather than brick-and-mortar, allows you to reach more customers. It could also be that adding a new product line or adjusting your current services ever so slightly is enough to raise revenue and your profits.
It’s possible to increase profits and grow your business, even when things are slow. If you’re not sure where to start, New Direction Capital’s virtual CFOs are here to help. We work with you to help you put together a plan to achieve profitable growth. Contact us today to learn more.