Ten simple strategies to make more money in your business (plus a bonus)

Making money in your business isn’t rocket science, it’s about the basics

Making more money in your business isn’t rocket science. If you spend less than you earn, you’ll end up with more money in your bank account. Even Donald Trump knows that (although…).

I know I know I know… Business finance doesn’t operate like a simple household budget, you  may need to borrow investment funds, finance your cashflow, obtain working capital, factor your invoices… Banks and investors exist for a reason, but even so, in the end, to make more money in your small business, you need to generate more profit (margin) and spend less cash than you pull in.

So here are the Ten Key Strategies to Make More Money in your small business. Look at each of the strategies in turn, and set aside time in your diary over the next months to implement the actions I suggest for each one and I absolutely guarantee you’ll make a lot more money this year than you did last year.

I’ve also written in great detail about making money in your business here

Jump ahead to each strategy:

1. Little pebbles Big ripples
2. Someone has to be the most expensive, why not you?
3. Collect Collect Collect
4. Discounting is for dogs
5. Delegate Delegate Delegate
6. It’s Gross
7. Specialise Specialise Specialise
8. Vilfredo Pareto
9. Systemise Systemise Systemise
10. Do you want fries with that?
11. Bonus

1) Little pebbles big ripples

Someone showed me this strategy early in my years as a business coach, and I still wish now that I’d come across it in the early days of my life as a business owner. Have a look at the PDF you can download with this link here. It shows that if you make an overall improvement of only 5% across your business, your actual profits will double. It seems like a magic trick, but it isn’t. It works, always. If you make a 5% improvement in revenue, a 5% reduction in Cost Of Sales and a 5% reduction in your overheads, your profits will double. Try it out, stick your own numbers in the little table and see what happens… Try 2% or 1% and see what enormous impact even such small improvements have.

Go ahead and do this today:

Pull out your P&L for the past 6 months or a year and work your way through it from top to bottom… How can you make a really small improvement across the board in your business in the coming year?

2) Someone has to be the most expensive, it might as well be you

Recently I worked with an artist, a sculptor. She was getting ready for a group exhibition at a prestigious gallery where she was showing 4 pieces of her work. At a group exhibition like that, there’s a lot of art vying for attention and it can be hard to be noticed. We talked about how to stand out from the other 8 exhibitors and I suggested to her to double her prices, or rather, to aim to have the most expensive pieces of work in the room. If your pieces are the most expensive in the room, you can be sure that people are going to take note. Anybody who has ever opened an exhibition catalogue, has quickly run their eye past the prices, at the cheapest and especially at the most expensive pieces, and they’ve gone and had a look at the expensive ones, guaranteed. And a journalist who comes to covers the exhibition opening for the newspaper does so too. Being the most expensive sends all kinds of marketing signals about quality and specialness.

My client swallowed, took a deep breath, and doubled her prices. She did turn out to be the most expensive “in show”… And she did sell one of her pieces… For twice as much money as she’s ever made before… Nice one.

Go ahead and do this today:

Have a look at your prices… Why couldn’t you be the most expensive? Is there actually a good reason to be cheaper than the competition? Is your stuff worth less? No, I didn’t think so… So let’s get your prices up… Starting next week.

3) Collect Collect Collect

It doesn’t matter how much profit you make, if the cash doesn’t end up in your bank account. Money that’s not accessible to you is worthless. Many business owners make the mistakes of invoicing late, not setting payment terms, or setting lax ones and not enforcing whatever payment terms they do have. A very large percentage of businesses that struggle or go broke, do so, not because they’re unprofitable, but because they don’t collect their cash in time and run out of money. Cash flow stress is especially problematic in growing service based businesses. I’ve written in much more detail about cash flow and collecting here. I often tell my clients that if they allow their customers to pay late, they’ve suddenly become a bank and as bankers, they suck.  As with so many things in business, the first thing to do is to design a system, a collections system, and then, enforce it, religiously.

Go ahead and do this today:

Run a report in your bookkeeping system called the Aged Debtors report and have a look at who owes you outside of your trading terms. Starting with the low hanging fruit, pick up the phone and simply ask this question: “Hi there mr customer, I just noticed that you owe us $12,536.24 and that this amount is overdue. Could you let me know by what day we can expect payment? Next week Wednesday? Thank you, that would be great, have nice week.”

Whatever date the customer promises to pay his bill, make a note on the following date in your diary. On this date, check if the payment has been made and if not, remind yourself that the customer has now proven himself to be a lier and hence, immediately fire off a stern email. Refer the customer to your conversation and remind him of his promise, and give this client 48 hours to pay up… or else. In 48 hrs, commence final warnings and be prepared to forward the debt to a collections agent. Run this simple procedure next week, with each and every one of your overdue debtors and I guarantee you, you’ll halve your outstanding debts in a matter of weeks at most.

4) Discounting is for dogs

Nothing good ever came of trying to make more money by discounting. IT . DOES . NOT . WORK . EVER

I know I know I know… It seems to work for Woolies and Coles, right?… Well that’s arguable, but more importantly, you aren’t Coles. You don’t sell 15,000 different convenience products in 2500 stores all round the country (and you’re not competing against Aldi)… You’re probably not even in retail. So if this article was written for the CEO of Woolworths, I might have to tone down my language. But it’s not, it’s written for you, and if you think you can make more money in your business by offering discounts, you’re sadly mistaken. You’ll increase your problems, decrease your margins and heighten your stress and truly no-one ends up happier. Just don’t… Trust me on that.

Go ahead and do this today:

Get an A3 Piece of paper and a thick black texta and write in capital letters across the whole page: I SHALL NOT DISCOUNT and hang it up above your desk.

5) Delegate Delegate Delegate

Your time, your braincells and your health are the most valuable resources in your business. Everything else you can buy, borrow or steal more of (more here).  If you want to make more money in your business, you need to learn to maximise your own time. You should always be asking yourself: Is this thing I’m about to spend my time doing, the most valuable use of my time, right now, or is there something else more valuable I could be doing. If there is, then look for the best way to give this thing you are about to do, to someone else. Delegating the lower value tasks to others is one of the sure fire ways to start making more money in your business.

Go ahead and do this today:

In the process of deciding how to use your time, there is a simple tool called the 4 Quadrants of Time Management. Originally designed by general Eisenhower and made famous by Steven Covey in his book “The seven habits of highly effective people”. You can read more about getting the right things done here. Read the article and have a look at your week ahead. What can you delegate next week?

6) It’s Gross

There is one key number you have to focus on every week and every month if you want to start to make more money in your business and that is Gross Margin or Gross Profit (more here). I often refer to Gross Profit (GP) as the King of Numbers. If you only focus on one number in your business, make it Gross Profit. Revenue is meaningless, Net profit is confusing and you have little direct control over it and many of the other numbers in your business will give you a partial insight as best. Gross Profit or Gross Margin (expressed in dollars and as a percentage) can actually tell you just about everything you must know on a weekly and monthly basis about the health of your business. It’s got to be your target: “Every week we must make $xx in gross profit at xx% of revenue.

Go ahead and do this today:

Run a P&L report for the last 6 months or the past year. How much Gross Margin did you make? At what percentage of sales? Was it enough to cover your overheads and expenses and did you end up with a percentage of net profit left over? If not, how much Gross Profit should you make every month to pay for the overheads and have something left over? Now, once you have decided on that number… Stick it on the wall, (next to the note about discounting) and ask yourself: How can I make sure we hit that number every month this year?

7) Specialise Specialise Specialise

If you sell what everyone else sells, all you can do is compete on price and you know what I think about that, right? (have a look at the wall in front of you, with the A3 note about discounting). A key strategy for making more money in your business is to niche your business, to become the expert in a small section of the market. Make your expertise an inch wide and a mile deep. I read a famous book a while ago “Blue Ocean Strategy, how to make the competition irrelevant” (I wrote about it here), and it’s become increasingly clear to me that the most effective effective strategy for making more money in your business is to become a recognised expert in a small niche. It gives you a perfect opportunity to become “The most expensive in the room” (see above) (More about finding your niche here)

Go ahead and do this today:

So, get yourself a note book and brainstorm, what are you really really good at? What specific problem do you solve better for clients than anyone else? What are you passionate about, really passionate about? What do you get out of bed for in the morning? Remember, customers do not buy what you do, they buy the solution of a problem they have.

8) Vilfredo Pareto

Vilfredo Pareto was an Italian engineer at the end of the 19th century. I don’t believe mr Pareto was especially good at making money but he made some very clever observations on matters of commerce. Pareto is known especially for the 80/20 principle. The 80/20 principle is about the observation that inside economic systems most things are unevenly distributed. (for example, Pareto observed that 80% of the wealth of Italy was held by 20% of the population, in his time). This is how that’s relevant in your business. I am willing to bet that in your business, 80% of your profits come from 20% of your clients and worse, 80% of your losses also come from 20% of your clients. If you want to make more money in your business… That last sentence is where the low hanging fruit is to be found.

Go ahead and do this today:

Ideally of course you’d have a business management system or business intelligence system that could run a report for you with the answer. It’s certainly something to be aiming for in the long term to install such a system. But I’m guessing you don’t have such a system yet or it’s not fully operating yet. So it’s going to have to be a manual exercise, probably a spreadsheet or a simple notebook. Set some time aside and do the number crunching. Where do you lose your money? It might be to do with certain categories of customers, or with specific customers, or instead it might be certain products or services you sell that always cost too much. Whatever it is, find it. And then… once you found it… Stop doing it… STOP IT… AS SOON AS POSSIBLE.

9) Systemise Systemise Systemise

Systemise, automate, productise. It’s what made McDonald’s heaps of money. Far be it from me to suggest your business should be another McDonald’s (read about my problems with McDonald’s here), but it’s certainly the case that systemising parts of your business is a great strategy for making more money. Anything you do in your business that can be standardised should be considered for systemising. When you systemise something it means you can start to get more efficient and employ lower cost staff to carry out that part of your operation.

Go ahead and do this today:

Set aside an hour to look at all the operations in your business and select three to develop a system for. I’m not necessarily talking about very complicated systems. small things such as how we answer the telephone, or how we go about ensuring we have supplies of printer ink, or how we respond to quote requests. Write out the system for each of the three things and roll them out throughout your business.

10) Do you want fries with that?

As we were talking about McDonald’s already, this is another strategy they’re famous for. It’s actually a system in itself of course. The up-sell. Effectively, the up-sell is the only discount you’ll ever make money on. The principle behind the “Do you want fries with that” question is that for a small amount of extra money, the client gets a bunch more value. Normally fries cost $2 but in an up-sell situation the customer gets to buy a portion of fries for only an extra dollar. This may seem like a discount and therefore to be avoided at all cost. But it isn’t. The fries in question cost McDonald’s virtually nothing, probably as little as 10 cents, when added to the larger transaction, so they make an extra 90 cents profit from each customer that accepts the up-sell.

A client of mine, an electrician, has trained his employees to ask customers they do repair works for, whether they’d like their smoke alarms tested while they’re at it. In nearly all cases the batteries need replacing and the electrician charges a small fee for replacing the batteries. The customers are very happy (and safe) and my client makes an extra $25 profit per job on average. Everybody wins. Judiciously practicing up-selling is a great strategy for making more money in your business.

Go ahead and do this today:

What can you offer your customers as an up-sell? Think about it… The trick is to find something useful/valuable for the customer that costs you very little to add to whatever you’re doing or delivering for the customer already. I have come across hundreds of different examples in my years, feel free to email contact me to brainstorm if you like.

Bonus: Profit first

I’m sure you agree with me that profit is important. You might have heard me say before that if your business doesn’t make profit and generate cash, it’s a hobby. So let’s just leave it at that, we want to make profit in our business. But if we all agree it’s so important, why do we leave the whole profit thing to last? After everything else is paid for we cast a hopeful look in the bottom of the bucket to see if there’s any profit left over. Let’s turn that around. Let’s take the profit out of the bucket first and set it aside in another bucket. The profit first principle as coined by Mike Michalowicsz is a really useful way to help you focus on the importance of making profit. More about profit first here

Go ahead and do this today:

So this is what I suggest you do, next week. Go and open a special bank account. A bank account that it’s easy to transfer money into but a bit more challenging to take money out of again. Then, decide how much you think you can take out for profit out of every invoice you send off. (5%? 10%?). And then from every payment that hits your bank account, automatically transfer that percentage into your profit account. If you do this religiously, better yet, if you delegate this job to your bookkeeper or accounts person, you’ll start to build amazing value and wealth in your business… trust me on that.

Summary

Focusing on making more money in your business is a great discipline. It will lead to stability and sustainability in your business and your life. There are many other strategies to make more money in your business of course. but if you focus your energies on these ten in the coming year, I guarantee that your business and your life will start to look entirely different.

I’d love to hear how you go, so drop me a line some time.

Cheers,

Roland Hanekroot

Purpose, Cash and Profit and the 7 Big Questions of Small Business

Business owners frequently ask 7 Big Questions about how to Build a Beautiful Business and Life.

The second of the 7 Big Questions is: How do I make more money in my business?

To answer the second question, I have identified 7 Rules for making more Profit in business.

The first of the 7 rules states that Profit is not the Purpose of business. This article also ties back to the fourth Rule, that “Cashflow is King“. There are many more articles on this site that explain how Purpose, Cash and Profit hang together, in some depth.

Download my 12 Question Cheat-sheet to help you find your next Coach.