With the economy in recession, many businesses have faced the challenge of re-evaluating how they operate.
One of the most difficult decisions is whether to cut costs or continue spending. But which of these activities could help increase your profits to build a more resilient business?
Business Australia Chief Customer Experience Officer Richard Spencer shares six ways SMEs can improve their profit margin, despite tough economic times.
New marketing strategies: Review your business marketing activities to see if there are better ways you can make sales and grow your market share. A good place to start is focusing on communicating a strong and unique selling proposition, one that helps your business stand out from the crowd. Marketing does not need to be a big expense, there are plenty of free online resources on offer, through content and social media marketing for example.
Flexible staffing: Even with support programs like JobKeeper, loss of revenue has forced some businesses to reduce their headcount. If you are trying to do everything to stand down staff, another option is keeping staff employed at reduced or part-time hours, which allows the business to be more financially flexible while retaining important skills. Alternatively, you might want to consider training employees to take on a wider range of responsibilities. Conducting a skills assessment can help identify potential skills gaps. Engaging contractors and freelancers can also help to reduce costs as needed. Wages and working conditions are sensitive topics which could make or break employee morale. Remember to communicate any changes clearly and try to include employees in the conversation when seeking solutions.
Create new revenue streams: Diversifying your customer base can be a smart business strategy during an economic downturn as it can help minimise the impact of losing other crucial clients. This could involve pivoting your business to serve more essential industries where consumer demand is likely to grow, such as health, education or remote working. Adapting your existing offering to align with these new consumer needs can be an effective way of increasing profits and expanding your market.
Cost efficiencies: Reducing business costs should never have to involve cutting corners or reducing the quality of your overall offering, including customer service. Instead, try to seek out ways to cut unnecessary fat to the end of reducing both financial risk and waste. For example, try negotiating more flexible terms with your suppliers in order to still meet customer commitments without things piling up in the warehouse before being sold. Fine-tuning your sales forecast can help find the sweet spot between supply and demand that results in steadier cash flow.
Focus on the customer: Being responsive to customer needs is a critical business strategy during a sudden market slump. It can help to improve retention and sales volume while giving your brand some extra gloss. This involves things like surprising customers with discounts and giveaways, running a loyalty program tied to incentives, listening to and acting on customer feedback and over-delivering on promises.
Partnerships: Teaming up with businesses offering complimentary (or even similar) products or services could also help boost your profits. This practice is also called co-marketing. Combined efforts may enable you to offer greater value to customers while also expanding your audience reach. A good example is a food delivery service such as Deliveroo, which offers contact-free delivery options to encourage people to support their local hospitality industry, thus boosting each other’s business.
At the end of the day, every good business strategy should have a positive impact on your bottom line. Examine every corner of your business carefully to unveil where you might be able to cut costs and expose higher profits.
About Business Australia
Business Australia is a free membership organisation that provides tools, resources and advice to support businesses of all sizes. Whether a business is just starting out, looking to become more efficient or wanting to grow, Business Australia exists to help them get there. It costs nothing to join, simply register online using an ABN.
In response to COVID-19, Business Australia has turned its free to access website into a COVID-19 hub offering free support to business owners and managers with a specific focus on navigating this crisis. Additionally, Business Australia recently launched a Stimulus Advice Line, a free phone advice service developed to guide businesses through interpreting the complex government stimulus and criteria. For more information visit businessaustralia.com.
For more information visit http://businessinsider.com.au