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Here’s how your business can grow revenue in tough conditions (PART 2)

Here’s how your business can grow revenue in tough conditions (PART 2)

The small business owner’s elusive goal — how to increase revenues, how to increase the value of their business and then, how to find sources of recurring revenue and apply that in their business. We have established that these are indeed tough times to remain in business. Stiff competition, amongst other things, have made revenue-making channels a tough one for many businesses. Your sales revenue can be a key profit driver in your business. To increase your profitability, you should develop a strategy to grow your sales. You can look at things like:

You should examine the products and services you offer, your target market and your pricing strategy to see if you can make improvements.

Review your product or service pricing

It’s a good idea to review your prices often. Changes in your marketplace could mean that you can increase prices without losing sales. However, you should test any price rises before you make them permanent.

Use the Pareto principle to target the right customers

It’s not just your prices that affect your profits, the type of customers you’re selling to can have a big impact. To find out the most profitable customers, you can apply the Pareto principle.

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Often known as the 80/20 rule, the Pareto principle proposes that around 80 per cent of your profit is gained from 20 per cent of your products or services. Similarly, 80 per cent of profit is often also gained from 20 per cent of customers. You may be able to increase your profit margins by targeting your most profitable customers, even if you lose the less profitable ones.

[READ MORE: Here’s how your business can grow revenue in tough conditions (PART 1)]

Review your product and service offering

If you offer a range of products and services, examine the profit margins of each. You can work out what individual products cost you using activity-based costing. When you look at your current offering, you may find that some products do not deliver good returns. Consider concentrating your efforts on your more profitable offerings. Your products or services with the highest gross profit margin are the most important to your business, as they generate more money. Once you have identified your most profitable items you should concentrate on achieving higher sales targets for them. This may require you to rethink aspects of your business or to devise strategies for improvement.

Carry out regular market research to identify products and services that are in demand. Keep up to date with market trends, as this will help you identify new opportunities to generate profits.

What more can you consider?

Prioritize these strategies

Once you have chosen strategies to make your business more profitable, you should prioritize them in order of importance. It’s a good idea to write down your goals and the corresponding strategies to achieve them, and also how you plan to implement your strategies.

[READ ALSO: Why investors should understand the basics of financial statements]

Conclusion

Growing a small business is really challenging, and it is easy to find your business caught in a flat growth cycle. It is possible that your current customers can provide an excellent source of revenue and profit growth for your company so don’t neglect the gold nuggets sitting inside your customer base, it’s the key on how to increase revenues, and then, the value of your business.

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