To grow any enterprise, you must continually seek ways to turbocharge its engine. You must develop strategies that will drive sales to ever-higher levels while ensuring that your growth in revenues translates into higher cash flow and profits.
Essentially, there are seven ways to increase revenues. Mastering any one of the seven will produce significant results. Success in all seven will lead to dramatic growth.
1. Make more sales. The first and perhaps most obvious way to increase revenues is simply to make more sales. Of course, one of the best ways to accomplish this objective is by expanding your customer base.
How can you attract more patrons? What steps can you take to bring more customers in the door?
Ask: What new strategies will allow you to attract more customers?
2. Sell more often to existing customers. In addition to expanding your customer base, you can also make more sales by selling more often to the same customer. Customer acquisition costs can be enormous. Once you have developed a customer, look for ways to increase the number of times you sell to him in any given period. In addition to increasing your sales revenues, such sales will also be more profitable.
Ask: How might you increase the frequency of purchases by your existing customers?
3. Sell something else. In addition to increasing the number of transactions per customer, you might also be able to sell the customer additional products. Increasing revenues from your existing customer base in this way is yet another example of capitalizing on your original customer acquisition cost.
Ask yourself, “What else would someone who is purchasing my product or service be interested in buying?” The man putting his car through a car wash may be interested in automotive accessories, such as seat covers, organizers, or air fresheners. The woman buying a new pair of shoes might want to complete her wardrobe with a matching handbag. A person stopping to pick up a magazine before boarding a plane could be interested in buying a pair of nonprescription reading glass.
Ask: Does the opportunity exist for you to sell additional products to your existing customers?
4. Make larger sales. Another way to increase your revenues per customer is to make larger sales. If our candle manufacturer were able to increase the average number of candles sold in each transaction, clearly this would be reflected in higher sales revenues overall.
Ask: How might you increase the dollar size of your average sale?
5. Increase your prices. Perhaps the easiest way to make larger sales is to increase the price of your products or services. The question becomes, how do you justify the higher price to your customers?
The answer is simply this: You must increase the perceived value of your offering. Remember, your competition dictates your price. You must find a way to positively differentiate your offering from those of your competitors in the minds of your customers. You may achieve this by upgrading your packaging or improving your quality control or by any other means that makes economic sense.
Sometimes, the answer can lie in your marketing strategy. Consider the case of Bavarian Motor Works (BMW) in Germany. In the 1970s, the company radically changed its marketing approach, positioning its automobile as “the ultimate driving machine.” The company spent millions of dollars on a successful advertising campaign aimed at driving this image into the minds of consumers. The company was then able to raise prices based on the new perception of its product.
6. Make more profitable sales. To this point, we have covered four ways to increase gross sales revenues. But what is paramount importance to any business is cash flow and profits. In addition to achieving this end by increasing gross sales revenues, you can reach the same goal by improving sales margins – that is, by increasing net sales.
Examine the profitability of each of your customers. You may find that it varies enormously. Some have a record of returning products more frequently. The size of the average purchase of each customer will vary. So, too, will some customers purchase more expensive products than others. Each of these variables affects the profitability of each sale.
Also determine the profitability of each product. If you are offering more than one product, you will find that some are more profitable than others. Perhaps they have a higher margin based on current pricing, or maybe they are slower to turn over and eat up capital in carrying them as inventory. You can significantly increase the profitability of each sale by focusing on the sale of your most profitable products.
Do you know the profitability of your individual customers and products? This information can be a key to increasing your net revenues moving forward.
7. Reduce your selling costs. We have already mentioned that an important consideration in gauging the financial health and the future prospects for any business is the cost of customer acquisition. Do you know yours?
Examine your sales processes. Do you sell directly or through independent distributors? If you pay commissions, are your commission rates optimal – that is, are they high enough to attract good salespeople and low enough to be practical? Do you support your sales force or your independent distributors with excellent marketing collaterals, such as brochures, catalogs, and the like?
What about your marketing costs? Do you maximize the return on your advertising and promotion expenditures?
Do you have systems in place to accurately track your selling costs? If not, you may be enjoying strong growth in your gross sales revenues but not optimizing the profitability of each sale.
Continually seek ways to increase your revenues, both gross and net. Remember, in the highly competitive environment in which you operate today, there is no such thing as standing still or maintaining the status quo. You are always moving. The only question is: Are you moving forward or backward? The prime determinant of your direction will be your ability to grow revenues and profits.