“In school, you’re taught a lesson and then given a test. In life, you’re given a test that teaches you a lesson”- Tom Bodett quote.
So, what lessons have you learned in the first half of this year that will prepare you for success in the future?
It’s hard to believe that we are well into the first month of the second half of 2022 – but we’re here. And if the first half has not shaped up the way you would have liked it to, or you’re just looking for some ideas to improve your 2nd half business results, then it’s time for action.
There are three basic ways to grow any business – increase prices, sell more to existing customers and sell to new customers. Your primary goal as a business owner should be to get more customers to buy more from you, and more often. So, start with the basic building blocks and go from there to determine what actions to take to improve your 2nd half results.
Increase prices. When to raise prices and by how much is largely dependent upon prevailing market conditions and the competition. There are four ways to raise prices and the pros and cons of each should be considered before implementing across the board increases.
- Do it now. If you haven’t adjusted your prices in 12 months or more, then some form of an increase is probably warranted to offset the escalating costs of doing business. However, have conversations with your best customers first to get their reactions before moving ahead with any price changes.
- Graduated price increases over a specified period of time until the target price has been reached. The market (your customers) should help you determine the price ceiling before any major losses occur.
- Price sensitivity testing – i.e. by market segment, customer profile, offer, etc. This will enable you to evaluate where and how to implement price changes for maximum ROI results.
- Include additional products, services, upgrades and value bundles with current offers in order to establish a new aggregated offer/price structure.
Increasing prices is an effective way to improve both top-line and bottom-line results. Why? Because increasing prices requires minimal resources to implement in terms of staffing, budget, marketing, etc., and the returns to the business are immediate.
How much would a 10% price increase improve your 2nd half profits? Hint: The answer is much more than 10% for many businesses.
CAUTION: Be sure that price increases don’t result in excessive customer losses that would negatively impact net revenue and profit gains.
Sell more to existing customers. The first thing to explore here is the overall impact to revenues and profits of increasing the average transaction size or sale value. Increasing average sale values can be accomplished through up sells, cross sells and back-end product sales, upgrades, additional services and value bundles.
How much would a 10% increase in the average sale values improve your 2nd half revenue and profit picture?
Next, consider offering special incentives, discounts and promotions to stimulate short-term demand. Pull through sales and multiple product sales will also help increase the frequency of purchase, the average sale amounts, and shorten sales cycles.
What would a 10% reduction in the average sale cycle time mean to your business in terms of add-on revenues and profits this year?
Finally, consider a reactivation program to ‘win-back’ former or dormant customers. A gift or special offer could go a long way to get them buying from you again. Depending on how long your business has been in operation, these actions could dramatically improve your short-term revenue outlook.
Sell to new customers. This one is not so easy, is it? In fact, the hardest part of building a business is acquiring new customers. For most small businesses, a limited number of customers often dominate the revenues and profits achieved. Although it is much more expensive to acquire new customers than retain existing ones, every business requires a steady stream of new customers to realize its growth goals and keep the lights on.
The key to selling to new customers is in developing a compelling offer that appeals to them and they want to buy from you above all other choices. Start with an introductory offer that includes a one-time bonus or limited time special pricing to incent them to buy now. Once they have been added as a new customer, you can begin to market and promote add-on sales to increase the long-term value of the relationship.
How would a 10% increase in your customer base impact your 2nd half revenues and profits?
Apply the ‘10% Rule’ to the scenarios outlined above and get deeper into the financials to determine how each can improve incremental sales and profits. Depending upon your particular situation, combining new pricing strategies with targeted short-term sales & incentive programs could enable you to significantly improve results with only marginal price and sales volume increases.
I hope this article has provided you with some valuable insights to help improve your 2nd half results. If so, please feel free to share its content with others.
Enjoy the journey!
COPYRIGHT © 2011-22 John Carroll