Growing a business is never easy, and there are unique challenges at every step of the way.
There are two main challenges: firstly, improving the profit margin, and secondly, sustaining this growth in a healthy way.
From keeping a closer eye on your expenditure to the benefits of business clusters, here are five things to think about that can help to get business booming and guarantee growth.
1. Improve sales
Sales aren’t the be-all-and-end-all of a business, and improving them is no panacea, as the rest of this list will demonstrate. But increasing sales is a sure-fire way of improving your profit margins.
There are different ways in which you can improve your sales figures, but a broad approach is: breaking new markets and developing new products.
Once you have an established customer base, you should be targeting new markets, which means attracting new customers. One way to do that is to improve your offering of products, or introduce new services. This helps to widen your appeal to more potential customers.
You can also attract new customers by advertising . If you’re unfamiliar with advertising and want to know how to get started, beginning with online advertising is a relatively easy and low-cost way to start. See our beginner’s guide to paid advertising here.
The ultimate aim has to be on selling more, to more people. Advertising is a means to an end; the sale is what brings in the money.
Attracting new customers is the easy part, however; when they come to buy, the emphasis should be on either up-selling or cross-selling, extracting maximum value. This should be the goal with loyal customers, too – after all, it’s far cheaper to retain an existing customer than it is to gain a new one.
2. Sell ideas, not products
If you’ve done your research, appealing to a customer with a product is easy. If it serves a unique or useful purpose, to the right target audience and at the right price, they will probably buy it.
But one swallow does not a summer make, and one sale does not make a loyal customer. When it comes to customer attraction, it’s not just about providing competitive pricing.
Customers are more interested in brand values than the value of a brand, and to engender customer loyalty you’ll need to sell ideas instead of products. This means appealing to your target markets with a philosophy.
A successful brand will create appeal on other grounds that makes it stand apart from the competition. This is done well by brands like Patagonia and The North Face.
The brand guidelines of The North Face state that the company “was born not just as a brand but as an idea”. The mission statement of Patagonia declares the company’s aim to “use business to inspire and implement solutions to the environmental crisis.”
Both brands appeal to something beyond their products and have an identity beyond being a commercial outlet.
Your brand values play an important role in your businesses’ identity and an equally important role in attracting customers. If you need some help developing your brand identity, see our post on brand guidelines here.
3. Cluster together
Research from Opus Energy has shown that when businesses cluster together, there are a number of shared benefits for all involved, including cost-saving. If you can locate your start-up in a business cluster, there are collaborative and financial rewards for doing so.
Silicon Valley is a well known example of a business cluster. The San Francisco Bay Area had historically been the site of technological innovation, and today the area is famous because of the global influence it has had on the tech industry.
Business clusters can help to reduce business costs by improving productivity and allowing businesses to pool resources. Supply chains, for example, become cheaper when serving business clusters, thanks to their clients’ geographical proximity.
This drives down costs for businesses, and it is just one significant way of saving money, as well as the easy recruitment access to expertise and a pool of skilled workers, as a cluster naturally draws in niche talent.
4. Streamline spending
Look at where you can cut unnecessary costs across the whole business, and maximise efficiency wherever possible.
Effectively, this means minimising your overhead costs and consistently reviewing budgets to ensure that you know where every penny is being spent.
Having a detailed and in-depth understanding of your spending will allow you to track unnecessary expenditure and eliminate it, helping to improve your overall profit margin.
There are a number of ways in which you can reduce overhead costs. It’s all about working out where there is waste or excess. For example, if you can downsize your office without that affecting the quality of your output, it is worth considering as rent costs are some of the highest outlays businesses face.
This principle applies, whether you are located in a business cluster or not – there are always savings that can be made across the business.
5. Minimise risk
Businesses are constantly exposed to risk from different sources: financial risk, cyber-security and fraud threats, and data breaches, amongst others.
Minimising any potential financial loss through the above – whether through online fraud, legal action for breach of data protection, or fluctuating exchange rates – is essential to maintaining a healthy profit margin.
As such, minimising risk is essential to ensure healthy and consistent growth. Take the necessary steps to save yourself damaging costs over the long term.
The biggest liability for many businesses is data protection. Insufficient measures taken to protect personal data (whether about customers or employees) can land businesses in legal trouble.
Litigation for breach of data protection can be incredibly costly; some businesses are even moving away from holding too much data precisely because holding it without risk.
This was the case with national chain Wetherspoons, which deliberately wiped its customer email database, reportedly because the company could not determine if it held the correct consent.
It’s important to audit your practices when it comes to data protection to ensure you are compliant with the latest regulations. Find out how businesses can prepare for the new General Data Protection Regulation which comes into effect in 2018.