On a scale of 1-10, how would you rate the current performance of your business? Is there room for improvement? The answer, for any and all businesses, should always be ‘yes’. The universal quote, ‘nobody’s perfect’, rings true.
There will always be opportunities for any business to keep up with the latest trends and stay competitive in today’s unpredictable business climate. Especially if your focus is on scaling and growing your business.
Conducting regular business health checks and evaluating its current position in the market is one of the most beneficial ways to outline opportunities for growth. The market is constantly changing and there will always be opportunities for you to increase profits for your business.
In this blog, we will help you understand the importance of business planning and outline six strategies that could boost your profitability right now.
The importance of business planning
Before getting into the strategies, a foreword is in order. The below profitability strategies are the ‘main course’ of this blog. However, to fully comprehend how best to implement these strategies, successful business leaders respect the need for business planning as the ‘entree’.
It’s important to sit down, reflect on how profitability strategies fit in with your business planning. The latter can’t function or be implemented efficiently without the former.
Look at it this way…the how-to guides can explain step-by-step where and what to do to improve business profitability. But, how do you, yourself, as a business leader or business owner, actually implement and cater for this in your business? Every business and its inner workings are different. Understanding the basics and importance of business planning, the implementation of strategies and monitoring will allow you to take the below strategies and actually make them feasible actions for your business.
Here are some key statistics that highlight the importance of matching business strategies to business planning:
Suppose you do not keep up-to-date business plans. In that case, your business itself remains static and planning for growth and scalability becomes difficult as you don’t have essential and recent top-level information to accommodate this.
We’ve created a step-by-step template that will take you from beginning to the end of creating the ultimate business plan. Your business plan is a living document and should evolve to reflect your business's status accurately. It needs to remain dynamic to reflect the changes within your business. This doesn’t mean you need to update your entire business plan every month, or year or so.
By downloading our business plan, you will identify when you need to update certain parts. Essentially, when a component of your business plan changes, for example, when planning new profitability strategies like the ones listed below.
Six profitability strategies
Now you understand how strategy formulation and strategy implementation require the efficient planning of the other. Keep this in mind as you review the strategies that will offer profitability opportunities for your business below.
1. Expand your business
There are many ways you can expand your business. Tapping into new markets and industry verticals will broaden your reach. Identifying opportunities to launch new products and services is another growth option.
However while new business is important, the untapped value that lies within your existing customer base shouldn’t be forgotten. New customer acquisition is costly and can be time consuming so organic growth of current accounts is a no-brainer. Think strategies that keep up with evolving customer service models and focus on customer experience improvement.
Outsourcing could be the strategy to help your business achieve just that. A market leading professional services organisation leveraged outsourcing to support rapid business growth.
The integration of offshore staff into their already successful business model allowed them to continue on their path of innovation and thought leadership, without being bogged down in the day-to-day operations of running the business and managing projects. This has allowed them to grow their client base by 375% in three years, and also offer additional solutions to remain competitive in a tight market.
2. Reassess costs
An increase in fixed costs across areas such as utilities, rent, marketing, materials and even staffing can significantly eat into your profit margins. That’s why it’s important to understand each of your costs and identify where you can implement more efficient processes, supply or service arrangements to reduce them.
For example, a reduction in the volume of stock could be a great place to start for product-focused businesses. Buy stock as you go. Reducing the volume of stock you have on hand will allow you to cut and control costs such as storage expenses in your business. Large volumes of stock can cause a real issue for your cash flow.
Accurate forecasting and implementing, if possible, a just-in-time inventory method could reduce the overproduction of stock that goes to waste over time. Automating your investment replenishment process to ensure timely deliveries and avoid incorrect orders or double ups.
A service-based business could take a look at ways to decrease their overhead and staffing costs to in turn increase profitability. For example, this professional services organisation was looking to improve efficiencies, their lead generation engine and conversion rates by using the same annual marketing budget in a considerably different way.
The ultimate goal was to develop an inbound marketing strategy to help grow their business with less reliance on outbound sales activity. They ended up creating a blended onshore/offshore marketing team to achieve a 100% inbound marketing strategy which led to an increase in lead generation of 104% over a 12 month period. This is a great example of how reassessing your fixed costs can help drive profitably.
3. Increase your conversion rates
For online businesses, this is a big one. As of February 2022, the average conversion rate for eCommerce businesses sat at 1.53%. Ensuring you convert your online visitors to customers will be the key to increasing profits. Monitor your conversion rates and look for impact.
Conversion rate optimisation or CRO is a great place to start. You can increase your conversion rates by improving user experience and navigation. Review your content and ensure call to actions are in the right places. Provide informative and educational content and amplify them through the right channels to the right audience.
Consider following a step-by-step conversion rate optimisation plan such as the following:
- Set up a CRO-focused team and infrastructure
- Conduct a conversion rate audit
- Identify areas of opportunity in your website’s conversion funnel
- Perform qualitative research on how ‘users use’ your website
- Construct test hypotheses for CRO and implement test runs
- Analyze and learn from your test results
- Repeat as necessary.
Say, for example, you spend around $2,000 on advertising and from that expense, you receive 100 customer enquiries. If your conversion rate is 3%, then you’ll secure 3 new customers but if you improved your conversion rate to 5%, you would gain 5 new customers and so on. This is a gain of 2 extra customers for no additional advertising costs all through focusing on improving your conversion rates. And, in the end your bottom line increases too.
4. Remove unprofitable product lines or services
A pretty straight forward point that a lot of businesses overlook. If a product or service doesn't sell, why keep it in stock or have it as a service option for customers? Holding onto stock or hiring employees to maintain an unprofitable service offering will damage your bottom line. By removing these you can make room for new services, products or packages that have more potential of selling.
You can efficiently manage these unprofitable services or product lines by engaging in an unprofitable product or service analysis first. This way, a business could identify a part of the product or service that, if rectified according to customer expectations, could turn it profitable. If the analysis can’t identify an element to improve, then a business can confidently terminate the product or service and start investing funds into other more profitable areas of the business.
5. Re-evaluate your pricing and customer service
60% of online shoppers worldwide consider eCommerce pricing as their very first criteria affecting their buying decision. Don’t be afraid to re-evaluate your pricing to see where you can maximise your profits. Focus on marketing the products and services that differentiate you from similar businesses. Remember, customers are willing to pay more for quality.
You can re-evaluate your pricing by taking a look at what your target market is willing to pay for your products or services. You could assess competitor pricing levels and also invest in big data analytical platforms and matrix services that can complete market evaluations for your business.
This also applies to the re-evaluation of the customer service function of your business. Did you know that 64% of people find customer experience more important than price when making a purchase. This means that your customers are likely to choose your business for better customer service over a business that potentially has a better product than you.
As a result, customer service has evolved from 9-5 on business days to 24/7, 365 days a year. Leaving customers with little patience when expecting a response, in fact, 48% of consumers expect a response to social media questions and complaints within 24 hours. Businesses need to meet that expectation and react quickly in order to provide the best service and remain competitive.
6. Utilise your staff more effectively
Ask yourself, do your staff have the ability to show their full potential in the positions they are currently in? Having the right staff in the right job is key to business efficiency and profitability. If your staff are held back due to basic admin tasks, maybe it’s time to consider a different strategy.
Outsourcing is a resourcing strategy that will free up your local staff of the time-consuming tasks and save money for your business. This will allow them to focus on what they were initially hired to do.
Take for example this accounting firm who wanted to provide high quality bookkeeping and accounting services for their customers at an affordable price.They had previously tried to implement a new business model with this goal as its focus in Australia, but were failing to meet their targets due to capital and labour costs.
In 2014, they hired two offshore accountants to kick-start their business. As of 2021, their offshore team has grown to 11. The results? As a result of providing accurate bookkeeping to their clients via their offshore staff members, their local staff have been able to focus more on the high-value accounting services for clients.
This has not only saved them time, but increased profits. They have also achieved their goal of providing an affordable solution for their customers as a result of lower fixed overheads.
Now that you understand the importance of business planning and how it works parallel with profitability strategies, why not consider these 10 business planning apps you didn’t know you needed to help get you started?
Last updated on 26 April 2022.