6 Ways of Increasing Business Profit during Tough Economic Times
With the economy in recession, many businesses have faced the challenge of re-evaluating how they operate.
One of the most difficult decisions is whether to cut costs or continue spending. But which of these activities could help increase your profits to build a more resilient business?
Business Australia Chief Customer Experience Officer Richard Spencer shares six ways SMEs can improve their profit margin, despite tough economic times.
- New marketing strategies: Review your business marketing activities to see if there are better ways you can make sales and grow your market share. A good place to start is focusing on communicating a strong and unique selling proposition, one that helps your business stand out from the crowd. Marketing does not need to be a big expense, there are plenty of free online resources on offer, through content and social media marketing for example.
- Flexible staffing: Even with support programs like JobKeeper, loss of revenue has forced some businesses to reduce their headcount. If you are trying to do everything to stand down staff, another option is keeping staff employed at reduced or part-time hours, which allows the business to be more financially flexible while retaining important skills. Alternatively, you might want to consider training employees to take on a wider range of responsibilities. Conducting a skills assessment can help identify potential skills gaps. Engaging contractors and freelancers can also help to reduce costs as needed. Wages and working conditions are sensitive topics which could make or break employee morale. Remember to communicate any changes clearly and try to include employees in the conversation when seeking solutions.
- Create new revenue streams: Diversifying your customer base can be a smart business strategy during an economic downturn as it can help minimise the impact of losing other crucial clients. This could involve pivoting your business to serve more essential industries where consumer demand is likely to grow, such as health, education or remote working. Adapting your existing offering to align with these new consumer needs can be an effective way of increasing profits and expanding your market.
- Cost efficiencies: Reducing business costs should never have to involve cutting corners or reducing the quality of your overall offering, including customer service. Instead, try to seek out ways to cut unnecessary fat to the end of reducing both financial risk and waste. For example, try negotiating more flexible terms with your suppliers in order to still meet customer commitments without things piling up in the warehouse before being sold. Fine-tuning your sales forecast can help find the sweet spot between supply and demand that results in steadier cash flow.
- Focus on the customer: Being responsive to customer needs is a critical business strategy during a sudden market slump. It can help to improve retention and sales volume while giving your brand some extra gloss. This involves things like surprising customers with discounts and giveaways, running a loyalty program tied to incentives, listening to and acting on customer feedback and over-delivering on promises.
- Partnerships: Teaming up with businesses offering complimentary (or even similar) products or services could also help boost your profits. This practice is also called co-marketing. Combined efforts may enable you to offer greater value to customers while also expanding your audience reach. A good example is a food delivery service such as Deliveroo, which offers contact-free delivery options to encourage people to support their local hospitality industry, thus boosting each other’s business.
At the end of the day, every good business strategy should have a positive impact on your bottom line. Examine every corner of your business carefully to unveil where you might be able to cut costs and expose higher profits.
Plumbing Bros is Australia's only nationally franchised white-collar plumbing business which launched in Western Australia in 2016. Founder James Riddle said the business had aggressive plans for expansion over the next five-to-seven years with a vision to create 75 franchises across the country.
"When Covid struck we had to re-evaluate our expansion plans," James Riddle said. "Luckily we were classified as an essential service so our work largely continued.
"We were receiving an influx of enquiries about new franchises from people who had lost their jobs that came looking for a new direction. But we had to be strategic about where we moved next, and we had to turn a lot of people down."
"We implemented safety precautions really early on as restrictions were coming in to keep our staff safe. Using face masks and getting flu shots for our workers, that helped with our marketing that our existing customers especially weren't reluctant to have us come in to do jobs," he said.
"There were a lot of people working from home that wanted projects completed that they hadn't gotten around to so work stayed very steady for us. The concern now is with the slow-down in-house approvals that there will be a lull in the future that we need to factor into our plans.
"South Australia has done very well throughout the pandemic and up until this week remained our number one target for where we would like to expand to next. We currently have five locations in Perth, Melbourne, Brisbane, Sydney and the Gold Coast. Covid is now another major factor in our strategic planning alongside constructions levels and progress in each state."
To hear more about Plumbing Bros and for more inspiring business stories, tune in to Business Australia’s new podcast program, www.businessaustralia.com/resources/podcast
About Business Australia
Business Australia is a free member-owned organisation that provides tools, resources and advice to support businesses of all sizes. Whether a business is just starting out, looking to become more efficient or wanting to grow, Business Australia exists to help them get there. It costs nothing to join, simply register online using an ABN. For more information visit businessaustralia.com.