Profitability is an important measurement of small business success. Minor or major changes can lead to considerable increases in profitability without compromising your budget or business structure.
Many entrepreneurs are finding it tough to cope in business. This may be because their customers are spending less due to harsh economic conditions, or because they are forced to compete on prices and have their margins squeezed, or a combination of both.
Established entrepreneurs and management consultants, however, say each business has some profitable ideas capable of making it succeed. They note that the shrewd management of one’s data base of current and previous customers will ensure good profit margins for the entrepreneur.
Below are some tips which will help a business owner increase his profit, according to experts.
Understand your customers
Entrepreneurs must be able to identify specifically the products or services their customers want. But this cannot be done unless the entrepreneur understands the customer. Experts note that identifying who your customers are, and what is important to them will guide the entrepreneur.
This, they say, will help him increase his profit as his services will be appreciated and demanded by his customers. Entrepreneurs who do not know this may end up spending too much for marketing, advertising and promotions. By so doing, they may not appeal to their best customers and may lose customers loyalty.
Know what customers want
The best strategy to adopt when doing this in Nigeria is to interview your customers, experts say. In the process, the entrepreneur will understand what his customers’ challenges are. He will also know what they want and what they like best about his business.
A simple survey of customers or an informal interview with clients who the entrepreneur has good relationships with help him know what his customers really want. Experts note that when the entrepreneur understands the wants of his customers, he will be able to meet these wants. This will increase the entrepreneur’s profit in the long run, they add.
Develop good referrals
Good referrals in joint ventures with other businesses will also guarantee increased profit, experts say. They note that the entrepreneur must look out for businesses that could be developed into good referral sources for his venture. He should also consider other companies or business outlets that offer services that his target customers often demand.
A good referral source will refer potential clients to you and you in turn, may decide to pay the referral source a fee, or a percentage of the business that he generated for your company.