Like it or not, your business’s expenses go up each year. To stay profitable, your business needs to grow so it can absorb those increases. Here are five things you can do to keep your small business growing.
It’s a simple objective but difficult to pull off. In order for your business to keep its doors open, it has to continue to grow. If this year’s numbers end up near the same as last year’s, your business is in danger.
The average inflation rate over the last several years has run close to 2 percent. This means that the dollar you made at this time last year is worth 98 cents today. If your revenue is the same this year compared to last year, you actually made 2 percent less. If your margins are thin, 2 percent is significant.
Then there is the cost of doing business. You can take some of that cost into account in the inflation figure, but not all. Minimum wage and healthcare insurance increases can mean you have to sell a lot more just to maintain the status quo. International trade issues may also effect your costs of doing business.
So, it’s imperative to grow. But how can you do it? Here are a few ideas.
Trim the Fat
There are two types of growth. Top line growth and bottom line growth. Top line growth is an actual increase in revenue. Bottom line growth is the trimming of expenses allowing you to keep more of your earned revenue. As businesses grow, they often try new ideas, hire new people, and purchase new equipment. Much of it is likely to produce revenue but some areas of your business might cost more than the revenue they produce.
Do you have an employee who isn’t contributing to your company’s revenue? Rework their job description or let them go. Do you have equipment sitting idle? Sell it. Do you subscribe to various online services that you do not use? Cancel them. Bottom line growth is often the easiest way to increase margins because it doesn’t rely on finding new customers. Keeping more of your revenue as profit is growth.
If you’re a hairstylist, are you selling higher margin hair care products that you use to give your client the style they love? If you’re in the cellphone business, are you selling wireless earbuds, cases and other accessories along with phones and plans? Regardless of your business, there are probably complementary products that you haven’t explored yet.
Think about this: Does that product have to be complementary to a current product or service currently available to your customer? If you’re a financial adviser, could you bring an accountant, tax professional, or attorney into your practice?
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If you’re a local business with sales coming primarily from your community, could you build an online presence? On the other hand, if you own an Internet business, are your offerings attractive enough to open a physical location, operate a food truck, or sell at festivals, flea markets and other events?
How about other demographics? Dermatologists who treat diseases of the skin may branch out to younger populations by offering higher end skin care products. An electrician that usually works with contractors in new construction could start a residential repair arm.
Don’t lock yourself into one market. Every business has multiple demographics and by adding those “complementary products,” it might be easier to reach more customers.
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Open a Second Location
Maybe you don’t have the sales to support a second location but don’t think of a second location as a copy of your current space. Think like the Postal Service. If you live in a community where there’s a post office inside a gas station or other retail space, you understand what to do. Your second location could be a shared space with somebody else. It could also be an online or mobile location.
However, before you decide that you don’t have the sales to support a fully functioning second location, have you gone over your financials? Keeping your risk tolerance in check is healthy but don’t be so conservative that you don’t allow for growth.
If you identified a good location that puts you in a geographic market likely to buy your products or services, stretching yourself might be worth the risk.
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Bring on Pay-For-Performance Salespeople
Your customer, business acquaintances, and Gig workers who want to make money may all bring you business if you pay them a fee for doing so. Set up a formal affiliate or leads program, or set up offers in the Drum service that people who want to make money can promote to their friends and acquaintances. When you pay only for leads or for actual sales, you grow your business without spending on advertising that doesn’t get results.
What do you want to see in year over year growth? Do you want to grow 10 percent from last year’s levels? If you do, put a plan together to do that. Even better, set longer-term goals.
What do you want to see over the next five years? If you make an investment into your multiyear growth, this year’s numbers might not look so good but it will come back to you many times over as your investment grows.