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Friday, November 10, 2006

Secrets To growing Business Profits

While these business secrets may be easily understood, too few business owners think about them.

These are business profit secrets you could have developed yourself with some quiet thought; perhaps you have.

All of your business ideas for increasing positive cash flow fit into two areas. First you can decrease the costs of business operation, second you can increase the per capita spend of your customers.

The costs of operation will be most evident in your fixed expenses.
The key for your small business is not just the cost of your office and tools. Even most variable expenses like payroll and utilities are well understood. Since these are so apparent we won't dwell here.

Your most important business expense is the acquisition of your customers.

Your key business practice to controlling the cost of customer acquisition is measurement.

This bring us to the second secret of business profits, and of course it is related to the first secret of business profits. There are just four ways to increase your income.

  • get more customers

  • get your customers to buy more

  • get your customers to buy more often

  • get your customers to buy more expensive goods or services

These are easy to say, but difficult to accomplish. For those supposed sharpies that just count the sale and move on, they are leaving massive amounts of money behind them. A satisfied customer has a large, residual, life time value - in any business. How much value does a particular customer have?

Your key business practice to improving the value of retaining a customer is also measurement.

Before this turns into a book called Secrets Of Growing Business Profits let's summarize the measuring process. There is only way you can tell if what you are doing this week is more profitable than what you did last week. That is to measure the entire client experience process.

You can know the cost and value of that prospect walking past your mall store window. The cost per prospect is the difference in rent and expenses between this store and and one on a side street. Divide that cost difference by the number of people walking the mall, and you have a cost per prospect or cost per impression.

How many of those prospects enter your store? Divide the monthly price difference by that number and you can find a brick and mortar equivalent of cost per click. Keep measuring for the life of the customer. You want to find out how often they buy, what they buy, what percentage buy something more expensive, etc. The more you know, the better you can serve your customers.

Even with a mall store there are other methods to acquire customers. Pennysaver ads, newspaper ads - with and without coupons, radio - the list is huge. Try them all - track and measure results, and compare the life time value of the customers to their various acquisition costs.

This is the business profits secret - if you measure and compare, you will find many profitable surprises.

The value of a customer is usually not related to cost of acquisition. Your return on client acquisition dollar spent in different ways can vary widely. There are smart business owners that knowingly and willingly lose money on a first transaction. They know the average life time value of their customer.

You now know the base costs and income per type of prospect or lead - the new game is to improve profitability at each step in the process. Replace one factor - check results, modify and repeat.

Increasing your business profits is simple, don't leave all that money behind.

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