When it comes to turning a profit, many business owners make the mistake of assuming that charging a premium price is the only way they can increase their profit margins. While low prices can certainly be a problem, raising your prices too high can cause sales to decline, leaving you with similar issues to what you were facing before.
Fortunately, adjusting your prices is far from the only way you can build a profitable business. By doing some extra digging on the back-end, you can increase profits without pricing your products or services out of reach of the average customer.
1. Focus On Customer Retention And Repeat Sales
One of the most-repeated adages in the business world is that it is much easier to keep an existing customer than to try to onboard a new one. It’s also a lot cheaper. Some estimates conclude that it can be five to 25 times more expensive to acquire new customers. At the same time, increasing retention rates by a mere five percent can boost revenue by 25% – 95%.
Retained customers can become extremely loyal, buying from your brand repeatedly and even referring others to your business. They can easily become a meaningful source of growth, particularly if you use tools like email lists to keep in touch and give customers a reason to come back for more.
2. Reevaluate Supplier Costs And Other Expenses
Your company’s overhead can have a surprising impact on your profitability. A large number of ongoing costs can make business expenses become impossible to manage. From the amount of money you pay your vendors to the amount you spend on utilities each month, every piece of business overhead should be carefully tracked so you can identify opportunities for improvement.
3. Don’t Focus On Sales And Discounts
In an effort to pump up their sales volumes, struggling brands will frequently slash prices or offer huge discounts to their customers. While this may work for large retailers, it can actually backfire for smaller brands because they’re ultimately left with less money to cover ongoing expenses.
When you work on your pricing strategy, reduce costs and increase sales, you’ll be able to see a dramatic increase in your profit margins, without needing to charge your customers extra. After all, maintaining competitive pricing can be just as important for your long-term success in the market.
By making a price increase your last resort for increasing profits, you’ll gain a distinct competitive advantage that helps you stand out in a crowded online marketplace.
Link to full article written by Stephanie Burns at https://www.forbes.com/sites/stephanieburns/2021/03/24/3-tips-for-building-a-profitable-business/?sh=3ad12d5817ac