In part one, we talked about how to increase your profits by reducing expenses. Here in part 2, you’ll discover ways to increase revenues (and profits) from each sale you make. Next, we’ll cover making more sales. Put it all together, and you’ll increase your profits exponentially!
One way to make more on each sale is to sell more items. Offer a discount when customers purchase multiples. For example, one widget is $20, two for $35 or three for $45. Yes, you get less per widget. But let’s say your cost per widget is $5. The “three-fer” offer increases your costs by $10 and your revenues by $25.
This is a simplistic example. but it illustrates an important point: Certain fixed costs (e.g., order taking and fulfillment) don’t vary much whether you sell one, three or more items. If you can encourage multiple sales with a discount, you can come out ahead, and make your customer happy.
I do the same thing with my consulting fees. A half-hour is $125, an hour $195 and 90 minutes just $265. Getting the customer, setting up the time, and preparing are similar no matter the session length. So the incremental cost of additional time is less than the initial cost.
Instead of multiples of the same items, you can sell add-ons to increase revenues. Ever notice that toy stores sell batteries? That’s because their customers want to get everything in one place. Yours do, too. If you sell printers, sell toner and cables. If you sell “how-to” sell the materials they’ll need.
Finally, you can increase profits by increasing prices. Most small businesses underprice, especially for services, because they believe they have to have the lowest prices to compete.
Will charging more cause customers to leave? You might be surprised by the answer. Of course, it depends on how price sensitive your market is, but at least a couple of things can happen when you raise your prices.
One, you can lose customers. But, you might find that you are more profitable without those particular customers. Often, the ones least willing to pay a reasonable price are the most unreasonable in their expectations. You may spend a lot of time and money trying to satisfy these clients–time and money which can be more profitably spent elsewhere.
And, you may attract new customers with a higher price. Others value our products and services only as much as we do. If you charge a cheap price, customers may believe you offer an inferior product or service. Of course, along with a premium price you must deliver a premium result–but you’re probably already doing that.
One other result you may find with these customers is that not only are they willing to pay a premium price, they will buy more add-ons than your bargain-hunting customers. Don’t be afraid to charge what you are worth.
We’ll wrap up this series next week, with several ways you can attract new customers.