Monthly Archives: December 2016

Tips to Increase Your Small Business Profits

As a small business owner, you know that sales, alone, aren’t an indication of your business success. The true measure of success is your business’ profits. True, increasing your total profit for the year usually requires increasing sales, but here’s the rub: if you’re not careful, the cost of increasing sales could lead to decreased profit margins or even a loss. So how can you boost your small business profits this year? Here are eight strategies to fatten up your bottom line.

1. Attract new leads with information marketing

Today’s customers are hungry for information. They want to educate themselves before they talk to a sales person or make a purchase. Providing them with that information can make your business more profitable because it helps you win the customers’ attention, contact information and ultimately their orders. Do it by offering information-packed downloadable special reports, white papers or checklists for free. The information doesn’t have to be long. It just has to be informative and promoted with an attention-getting headline. Promote the giveaway on your website and through social media and require at minimum an email address to gain access to the information. Be sure the giveaway includes a call to action to turn the lead into a paying customer. And don’t forget to follow up on the leads.

2. Use the leads you already have to get paying customers

No matter how you get your leads, if you’re like many small businesses, you don’t follow up on them as much as you should. In fact, chances are you only follow up on the leads you believe are hot leads, and then you may only follow up once or twice. The problem with that approach is two-fold. First, you waste the marketing dollars you spent to get the lead. Second, it keeps you from having ongoing communications with prospects who could become customers. Those possible customers include individuals who are just starting to research their intended purchase, and those who are ready to buy, but who have other more pressing things demanding their attention when you call. Ignore them and you’re likely to lose the sale to a competitor.

To solve the problem – and increase your profits this year – formalize your lead follow-up procedures. Have a plan for following up with the hot leads. List the steps you’ll use to stay in touch, including what to do if you don’t get a response after the first call or two. Plan how you’ll handle leads from customers who don’t appear to be ready-to-buy. Decide how you’ll keep in touch, what information you’ll send them or point them to. Have everything written and scripted out, and automated as much as possible so you’ll easily be able to start the process for each new lead. If you don’t already have it, develop a monthly or twice-monthly email newsletter that you can send out to all prospects who have asked for information about your products and services. The newsletter will let you stay in touch with and convert luke warm, not-yet-ready-to-buy prospects into paying customers.

3. Increase order size and/or frequency

The math on this is simple. If you have 100 customers who each spend $50 within one month, you take in $5,000. If you get those same 100 customers to spend $70 a month, you take in $7000 for the month – which translates to more profit for you without increasing your marketing budget. To get order sizes to increase, learn (and train your employees) to upsell and cross sell. If you’re a physical therapist, for instance, you might encourage patients to buy stretch bands, icepacks and other equipment from you so they can continue their exercise program at home. You might also be a reseller for nutritional supplements. Fliers in your waiting area and placing posters where patients will see them while doing therapy can all help sell additional services without your therapists having to “sell.” If you sell products through an online shopping cart, add a function that automatically suggests related products to the shopper.

4. Boost operational efficiency

The way you’ve “always done things” isn’t necessarily the best way to be doing them now. And, change could give your profits a significant boost.

For instance, what actually gets accomplished at those weekly meetings you hold? Try cutting back on them, freeing your time and your staff’s time to spend on other, income-producing tasks. If there’s information all staff needs to get from you, send it to them in email or set it up on a cloud-based document sharing system.

When was the last time you interviewed different vendors to see if you can get better prices or terms on the inventory or raw materials you buy? Or asked your current vendors for better pricing? What about your merchant account provider? Your phone service? (If you’re still using a tradtional phone line in an area with good cable or other VOIP service, you could be wasting thousands of dollars a year.) Cutting your costs without cutting quality gives your bottom line a nice boost.

How about your inventory system? Is it automated? Or is it manual, labor-intensive and prone to mistakes? While putting in inventory and order management software can be a fairly expensive project, if you do significant sales volume, the initial cost will be offset by the longer-term savings in employee time, and inventory accuracy.

What about all those reports your staff is creating, printing out, and handing to you… the same reports your administrative assistant later files in a file cabinet? Do you really need them printed and filed, using up ink/toner, paper, and file cabinet space (and therefore floor space)? Could they be stored on the cloud instead? Or, for that matter, do you really need those reports at all? And what about the orders or emails they are printing out and saving (in more filing cabinets) “just in case”?

These are just a few of the ways small businesses can increase efficiency. One way to find inefficiencies: write down what you do every day, along with why you do it, the time it takes and the results of doing the task. Ask your employees to do the same thing. Eliminate the activities that aren’t necessary. Another way: ask your employees to suggest better ways of doing the work they do.

5. Keep your employees happy

The process of hiring and training new employees takes time and money. Avoid that cost by doing what you can to retain your existing employees. Over the long run, having engaged, knowledgeable employees will increase your bottom line. You do not, necessarily have to hand out large raises. While you should keep pay competitive, small changes like a coffee machine at work, flex-time hours, a discount or a bonus for making sales will help your employees to feel valued. If they feel valued and rewarded for their work, they are more likely to stick around.

6. Offer maintenance contracts

Maintenance contracts and warranties can add a healthy injection of new capital into your business. After someone buys a product, they want to know that it will work. You can reduce some of their worries by offering maintenance contracts or warranties. In addition to bringing in additional revenue for your company, this will also help to create an ongoing relationship with each client that walks into your business. Before you launch a maintenance contract program, carefully work out the numbers to be sure you charge enough for the contract so that providing service or replacements to maintenance contract customers won’t put you in a money hole.

7. Expand to a new area

A small town may only need one cafe or supplement store. If your small business has already reached market saturation in your area, then consider expanding into a new sector. Before you decide to branch out, you will need to research the area first. How many similar businesses already exist in the area? What is the population density? Will overhead costs be similar to your current storefront?

If you are not quite ready to set up shop in a new town, consider setting up an online storefront to sell your merchandise.

8. Talk to your employees and customers

Your employees are your front line and connection to your customers. They have personal insight into what your customers want and current inefficiencies in your business. Ask them to share these insights! They may be able to make suggestions for new products, product changes, or ways to streamline operating processes.

Make sure you personally interact with customers at some point, too. Work a cash register, answer incoming customer calls, send out surveys to customers. Ask questions to find out if they are satisfied with your company’s products and services, and also be sure you ask customers to tell you what you could be doing differently and what they’d like to buy from you that you don’t now sell. Their answers will help you see ways to continue to boost your business and your bottom line.

Tips To Prepare a Price Quote

It seems so simple, doesn’t it? What’s so hard about giving somebody a price quote? The truth is that there’s a lot more to think about than just the number because a price quote is so much more than just the price. It’s a window into you, your business, and what the customer can expect if they do business with you. Savvy customers can find a lot of information in your quote well beyond price. Here’s how to do it right.

Before the Quote

You receive a call, e-mail, or a customer comes to your store asking for a price quote. They simply say, “Can you give me a quote on some repairs I need on my home?” Before you prepare the quote, get to know your customer. If you’re in the contracting business, you’ll probably end up at their home but first, qualify them.

Do you handle the type of home improvement or repair they’re looking for? Do they need it done within a certain time frame and can you meet it? Where is their home? Is it within your service area? Don’t waste their time or yours if it’s not a job you can do, it’s not a product you stock or service, or if it so far outside your area of expertise that you can’t get them top-notch service.

RELATED: How to Get Customers to Tell You What They Want

Next, if you have to go to their home, like in the case of our contractor, follow some basic rules. First, show up on time. Be a person of your word. If you say 2:00, be there at 2:00. If another job holds you up, call or text as soon as possible and let them know. Also, call or text when you’re heading to their home. That gives them a heads-up but also helps to make sure you don’t show up to find nobody home.

Look professional. That doesn’t mean suit and tie unless that’s considered professional attire in your line of work. In the case of our contractor, keep an extra shirt and pants in your truck that are clean, fit well, and make you look polished. It won’t matter to some people but looking clean and neat is a big deal to some of your potential clients or customers.

Finally, ask all the questions you need to put together an accurate quote. Will the customer be purchasing the paint for the rooms they want you to paint, or will you be purchasing it? How many high hats do they want in the ceiling of the finished basement, and how many light switches will they want and where will they be located? Who will be responsible for painting the new deck the customer wants you to build? This helps you and shows your customer that your attention to detail is alive and well. It also helps prevent disputes over what was supposed to be done for the price you quoted.

Along the same lines, practice and polish your general sales pitch. Tell your potential customer about you, your company, what makes you better than your competitors, and the basics of how you do the job. If it applies, have some pictures to show them, offer to give them names and numbers of references, and let them know that you’re licensed, bonded, and insured. (Or any other designation that comes with your line of work)

At the end of the conversation, make sure you have multiple forms of contact in case one doesn’t work. Let them know when to expect your quote and deliver on it. Don’t be late. You don’t want your customer thinking, “if she can’t get me a quote on time, how will the job go?”

The Actual Quote

Each different type of business will have different information but in general, your quote should have more than just the price. Send along some written information about your company—the same things you talked about in your general sales pitch.

Make the quote official. Don’t write it on a piece of paper or simply send a price in an e-mail. Have a quote form that looks official and polished. Remember, everything communicates a message about you and your company. The form should have your business name, any licensing numbers, logo if you have one, and all of your contact information.

Itemize your quote. List all the details that were agreed to. Nobody wants to see a number without knowing how you came to it. You don’t have to reveal all of your secrets—like wholesale pricing or anything, but if there are materials and labor, break those into line items.

In the case of our contractor, if multiple rooms need work, itemize each room so the customer has options. If you really want to service your potential customer well, give them multiple options. Maybe what they wanted will be out of their price range. Without asking, quote them at a level that fits their budget. That’s going to take more time but your competitors might not be quick to do that.

Give them a hard and fast start and completion date. If you really want to stand out, let them know that if you’re late finishing the job, they get a certain percentage discount.

Consider leaving some room to negotiate. You might quote 5% higher than you normally would in case you have a client that wants to haggle. Along those lines, let them know that if they get a lower quote, you would like a chance to match it.

After the Quote

Once you give them the quote, ask them when you should follow up with them. Your customer wants to see that you’re serious about working with them. They might wait for you to contact them just to see if you’re serious. If they don’t give you convenient time to contact them, send a note in 5 to 7 days.

More Information About Insurance in the Gig Economy

There are plenty of reasons to become a freelancer. The new “gig economy” is one where people are opting out of being on a company’s payroll. Instead, they’re forming their own company and taking contract jobs. There’s plenty to like about such an arrangement. There’s often more flexibility in your schedule and although you go from a couple of bosses to often many, you get to pick who you work with. Owning your own business can also be financially lucrative as you gain a reputation for dependability and quality work.

But as we’ve been exploring in our gig economy series, there’s a lot to consider before quitting your job and going freelance. We looked at the tax implications—the fact that you no longer have an employer paying a portion of your Medicare and Social Security taxes. That represents a lot of money.

Next, we looked at retirement. You no longer have a 401(k) that your company is paying into on your behalf. Retirement planning is now a solo endeavor so your pricing has to be high enough that you can contribute to a retirement account each month.

There’s one other major piece of freelancing you have to take into account—insurance. When you were an employee for another company, there were insurances in place to protect you and the company you worked for, but as a freelancer, it all falls on you.

First, and most important, is health insurance. Many freelancers get insurance through their spouse who remains on a company’s payroll—something for no other purpose than health insurance. If not, you can get coverage through the health insurance marketplace or through private companies. One word of warning: trying to save money by purchasing only catastrophic coverage isn’t in your best interest, especially if you have a family. Plan on getting a better plan. A 2016 analysis of healthcare costs found that a silver plan for a 40 year old non-smoker making about $30,000 cost $208 per month after the tax credit. But this is only the individual rate. Providing coverage for a family will be significantly higher. Before leaving your job, figure out your insurance costs. Sometimes health insurance alone makes freelancing as your sole source of income impossible until the business grows significantly.

Life Insurance

If you were to pass away, would your family quickly fall into a state of financial emergency? If the answer is yes, you need life insurance. Consider term life rather than universal. There are a lot of opinions out there but many experts agree that cash value life insurance policies aren’t efficient investment vehicles for retirement planning.

Disability Insurance

What happens if you’re temporarily disabled for an extended period or permanently unable to work? Where will your income come from? You might qualify for disability and get a monthly amount from Social Security but that’s not likely to support your family the way you were as a freelancer. It won’t be long until you need to consider disability insurance. Prices vary depending on your age, your health and your habits—whether you smoke, for example, but plan on paying 1% to 3% of your annual salary.

Liability Insurance

There are very few businesses where making a mistake doesn’t expose you to a potential lawsuit. That’s why you need business liability insurance. Contrary to some people’s beliefs, home based businesses often aren’t covered under the owner’s residential home owner’s insurance policy. General liability policies will cover you up to a certain amount for injuries customer might sustain while on your property, copyright violations, or alcohol-related injuries if your business deals with alcohol. Some business might need a commercial policy that ups the maximum payout. Because each business has different needs, it’s hard to put an average price on this type of insurance but a sole proprietor will likely pay between $50 and $100 per month.

Business Auto Insurance

If you’re a sole proprietor who doesn’t run a delivery business or something else that centers around their car, normal auto insurance might be enough but if you have employees or use your vehicle for commercial intent, you will probably need business auto insurance. Business auto insurance works a lot like the auto insurance policy you already know. Talk to an agent. They will tell you if you need business auto insurance and how much.

Industry Specific Insurance

Doctors have malpractice insurance, financial advisers have errors and omissions insurance, and many other businesses have insurances specific to their industry that must be in place. Once you hire employees you will likely need worker’s compensation insurance as well. As you grow and evolve, ask a trusted agent or your industry trade group what’s required.