Make This Your Most Profitable Year Ever – Profitability Tips

Make This Your Most Profitable Year EverIf you’re like a lot of small business owners I’ve talked to since we rang in 2010, you probably sympathize with this statement: “Enough with the doom and gloom already. I don’t want to know how awful the economy is, I want to know how to make a profit anyway!”

A couple of weeks ago, our very own Anita Campbell tackled that issue with an Intuit Community webinar titled, “Make 2010 Your Most Profitable Year Ever.” Joining her for the webinar was expert Andy Birol of Birol Growth Consulting.

In spite of a few technical difficulties early on, it was another of Anita’s information-packed sessions with a mountain of actionable take-aways for small business owners, sponsored by Intuit.

Anita started the webinar with a couple of poll questions, which elicited the information that a surprisingly high 71% of participants didn’t know what their customer acquisition costs are. From the second question, we learned that most business owners either know who their most profitable customers are (50%) or they have a general sense but aren’t 100% sure (43%).

Birol used the poll results to launch into a discussion of how to analyze your customers in order to maximize profits.

TIP: If your most profitable customers are increasing their purchases, keep them happy and find more like them by asking for referrals. If their sales are low/flat, enhance your products and services to generate more sales from them.

TIP: If your low profit customers are increasing their purchases from you, reprice your products or services to more accurately reflect the costs of serving them or selling to them. If sales to these customers are low or flat, reduce or rethink your costs for serving or selling to them and how those costs can be reduced so that these folks become more profitable.

TIP: Fire customers that earn no profit (break even) or cost you money.

Profitable growth does not necessarily come from expanding your customer base. Instead, growing profitably – that is, making a profit while your business grows – comes from selling more to the customers you already have.

The underlying theme in all this, which might better have been introduced first, is that it costs less to sell more to existing customers than it does to sell more by acquiring new customers.

Your current customers already know and trust you. That gives you the chance to establish your expertise and experience, which will differentiate you from your competitors.

TIP: Differentiation gives you a stronger brand and more pricing power, so work to establish that expertise and experience in the minds of the marketplace.

On the subject of pricing, which often gives small business owners the willies, here is a terrifically quotable quote from Andy:

“Price, for me, is the single most important demonstration of self-confidence that a business owner can have.”

And finally, profitable growth comes from being willing to take what you make or do and re-package it for new sales or distribution channels.

In short, the general way to grow your business profitably (even during this recession) is to focus on your existing customers, sell your expertise and the wonderful experience of working with you, beyond just your product or service; and packaging your offerings for sale in multiple channels.

And, just for fun, there was a list of 45 ways you can improve your profitability in 2010:

    Increase Prices

  1. Raise prices
  2. Eliminate discounts (or lower discount %)
  3. Services: define scope and fight scope creep*
  4. Push higher priced products, weed out low profit products
  5. Use marketing to convey your differentiation and value
  6. Increase sales and customer retention

  7. Improve customer retention through better customer services, better communications, increased value-add
  8. Cross-sell additional products or services
  9. Upsell to higher priced, higher value products
  10. Serve your most profitable customers well
  11. leverage additional sales and distribution channels
  12. Add self-paying sales like commissioned sales reps, PPC ads, affiliate program
  13. Invoice!

  14. Invoice promptly
  15. Make sure invoices are complete and accurate
  16. Use technology and automation to tighten invoicing and collection processes
  17. Improve productivity

  18. Reduce waste through controls
  19. Train employees
  20. Automate routine tasks
  21. Upgrade inefficient equipment and software
  22. Supplement tracking systems and analytics (a.la. Google) and “manage to your metrics”
  23. Ask employees for cost-saving suggestions.
  24. Reduce fixed costs

  25. Find smaller offices; sublet; move
  26. Employ part-time staff in place of full-time
  27. Subcontract to independent contractors
  28. Do preventative maintenance
  29. Reduce staff if necessary
  30. Change sales compensation to more commission, less guaranteed base
  31. Reduce variable costs

  32. Negotiate better deals with suppliers
  33. Find less expensive suppliers
  34. Take advantage of advance purchase discounts
  35. Find cheaper materials and supplies (assuming quality is still there)
  36. Hold online meetings instead of traveling
  37. Create self-serve resources for customer service
  38. If it’s not essential, eliminate
  39. Manage capital wisely

  40. Keep your books up to date, and review P&L versus budget forecasts regularly
  41. Know your key indicators: DSO; customer acquisition cost; gross profit margin
  42. Offer advance payment discounts
  43. Put slow payers on “watch list”
  44. Collect past due invoices quickly and personally
  45. Don’t overinvest in inventory
  46. Insist on shopping for alternatives
  47. Negotiate for as much time as possible to pay your creditors (e.g., 30 – 45 day terms)
  48. Make loan and credit card payments on time, to avoid extra interest and penalties
  49. Be tax smart

  50. Keep good up-to-date records to take advantage of all deductions
  51. Actively engage in tax planning
  52. Follow your tax calendar scrupulously to avoid unnecessary penalties, interest, and attorney and tax advisor fees

Or you can download the checklist here in a handy printable document (a PDF).

If you’d like to watch the webinar event you can check it out at, “Make 2010 Your Most Profitable Year Ever.”

Editor’s note: Please check out the rest of the webinars in this series, here:

2010 Small Business Trends & Opportunities with Anita Campbell

Integrate Social Media into Traditional CRM with Brent Leary

What is Social CRM and How It Can Help You Get More Customers with Brent Leary

How to Get More From Your Blog & Blogging with John Jantsch

10 Tips for Business Class Web Sites with Ramon Ray

4 Comments ▼

Dawn R. Rivers


Dawn R. Rivers Dawn R. Rivers, an award-winning small business journalist, regularly reports and analyzes small business policy and research as the publisher of the MicroEnterprise Journal. She also publishes research at the Microbusiness Research Institute and she blogs at The MicroEnterprise Journal Blog.

4 Reactions

  1. My favorite tip from Andy was to fire unprofitable customers. So many SMBs get trapped by “The customer is always right” thinking and get stuck with leaches. Get rid of them. They aren’t worth the time and effort.

  2. Great info, thanks. I would add my own favorite profitability strategy – to get paid up front, by credit card. This eliminates collections issues.

  3. Hi Dawn!

    Wonderful article. You have pointed out some very good ideas on how small businesses can increase their profits by making adjustments in the smallest and simplest of areas.

    No matter how large your business is, you can still apply a good handful of tips that you have provided!

    Thank you for your wisdom.

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