How to Increase Revenue in Your Small Business?
As a small business, you’ll constantly fight an uphill battle in order to stay solvent, which is made considerably harder if your company isn’t generating enough revenue. Fortunately for you, there more than several things to be done about this. This ranges from changing your overall pricing strategy, altering your internal organization or rethinking your position on your primary target market. All in all, there are several ways in which you can increase your revenue, thus making your business substantially more profitable.
1. Retarget former customers
The first thing worth mentioning is a surprising statistic which claims that about 8 percent of your regular customers make about 40 percent of your entire profit. This means that by retargeting your former customers, you stand to make a serious improvement to your revenue. The best of all is that these people don’t need that much persuasion, to begin with. In fact, if the first purchase was a satisfactory one, all you need to do is invest the slightest of efforts and you’ll easily win them back. One survey claims that an average buyer returns 27 percent of the time for a second purchase, while after a successful second purchase, they have a 45 percent chance to come back.
The exception to this rule, of course, are the one-time-purchase items. We’re talking about items like chess sets, exercise equipment and similar products. These items, for obvious reasons, don’t abide by same rules.
2. Improve the quality of your product
The simplest way to increase your revenue is to increase the demand for your product or even completely rebrand it. The greatest problem behind this lies in the idea that you need to invest a substantial amount of money in order to achieve this. We’re talking about purchasing better manufacturing equipment, ordering a better quality raw materials, hiring new staff, renovating your premises or leasing something better altogether and much more. If you decide to take the rebranding path, you’ll need an even greater investment. Keep in mind, nonetheless, that this is an investment that always pays off. This is why you might even make the idea of applying for small business loans into a serious consideration.
3. Selecting a profitable market
Another thing you need to understand is the fact that your revenue might be determined long before you actually enter the market in question. Namely, by picking a market with an average order value between $75 and $200, you’re creating a scenario in which you can have a profit margin of around $20 per sale. This means that you can be quite profitable even with a fairly small number of sales.
Apart from this, finding a fragmented market is also a great idea, seeing as how the last thing you need is to enter a race with 10-15 retailers holding a monopoly. This, however, can be discovered via a quick online survey. Still, you shouldn’t expect a complete lack of competition either. Lastly, try to look for industries with seasonal business opportunities, seeing as how this allows you to invest a huge amount of effort over a relatively short time-span. While this is effort intensive, it also means that any effort invested yields and amazing ROI.
4. Adjust your pricing strategy
Another thing that affects your revenue is the pricing strategy you set. Some businesses try to beat their competitors by offering incredibly low prices, yet, this strategy has a particular way of backfiring. First of all, this creates a scenario in which your products might be perceived as those of much lower quality, seeing as how it’s logical to associate low price with low production cost. This means that even though you’re presenting them with an opportunity to pay less, your audience will believe that they’re not getting a good enough worth for their money.
This is the so-called penetrative price, which aims to set your product on the map by attracting attention with low prices. Apart from this, you can also go for a price skimming strategy, which is a complete opposite. You start with relatively high rates and then lower them over the course of time. Little by little, you drop the price in order to milk every single purchasing power demographic out there. Needless to say, these are just some of the things you need to look out for.
5. Avoid selling commodities
The greatest problem with selling commodities lies in the fact that it greatly limits your options. The way this works is fairly simple – a commodity is something that anyone can produce or acquire, which means that staying competitive becomes much, much harder. Think about it, you have two different choices ahead of you competing in price or competing in a brand name. Both of these are fairly impossible for a small business, seeing as how large production operations can always create a more frugal end product, same as they can invest more in a visibility and reputation boost of their brand.
6. Coupons and discounts
Lastly, in order to keep people coming, you need to give them an incentive, most commonly in the form of coupons and discounts. Some loyalty programs award their clients with points depending on the value of the purchase they’ve just made. This gives them a reason to come back, seeing as how leaving these coupons unused may give away an impression of a loss, even though they, objectively speaking, probably aren’t saving that much. By playing these cards right you can evoke a sense of loyalty, encourage the sense of false urgency, as well as give your audience one more reason to purchase from your business.
The very best thing about the above-listed methods is that they either A) provide you with means to boost your revenue without any investment or B) provide you with an idea of the money-source you can turn to. All in all, where there’s will, there’s always a way and a small business that can’t rely on their sizable budget to carry them through all of these problems needs to find comfort in their innovativeness.
Neil is a digital marketing student, a DIY enthusiast and a beginner at the blogging scene. His home is the whole world because he travels a lot. While you are reading this he is probably somewhere other than where he was yesterday.