Tuesday Tip: Growing Revenue
Nearly half of all businesses with between 11 and 100 employees list growing revenue as their biggest challenge, partly because revenue growth can help manage cash flow and increase working capital. While some obvious methods of growing revenue, such as opening a new facility or launching a new product, are prohibitively expensive for most businesses this size, there are a number of more affordable ways to increase how much money comes in.
Increase Prices for Direct Revenue Growth
Increasing prices is the simplest way to generate more revenue, and it’s more possible than many business owners realize. Research must be done beforehand to determine whether the market can sustain a price increase, and business owners might want to justify the bump (e.g. increased operating costs, lengthy time since the last adjustment, offering more services, etc.). In many cases, however, prices can be safely increased with minimal customer dissidence.
If a business is able to increase prices without losing customers, this is often the best revenue-growth strategy. Because there are no additional expenses associated with the tactic, the extra revenue generated directly improves cash flow and can be saved up to increase working capital.
Coca-Cola has turned to this strategy multiple times, including when the company faced a sugar tax increase in the United Kingdom and aluminum tariffs in the United States. In both cases, Coke increased its prices and explained (through media reports) that the increase was directly tied to a governmental action. The increased revenues that followed helped Coke maintain profitability in light of increasing supply costs.
Upsell to Increase Per-Transaction Averages
Upselling is an effective way to increase per-transaction averages, and this is often easier to do than attracting new customers is. When regularly implemented, the cumulative result is frequently a substantial boost to a business’ bottom line.
In the case of Dollar Shave Club, upselling isn’t merely a way to generate more profits. It’s a primary means by which the company became successful. Dollar Shave Club initially lured customers to its site with the promise of a $1.00 razor. The home page, however, immediately greeted them with three razor options. Two of the suggestions were $6.00 and $9.00 respectively. By aggressively suggesting more expensive razors, the company eventually grew enough to offer even more products in its packages.
Almost every business has something that costs a small fraction of a primary product or service’s price. Whether this is a pack of gum, clothing accessory or car undercoating, a substantial number of customers will add it to the item or service to their purchase if an employee simply makes the suggestion.
Create Bundles to Entice Larger Purchases
Bundling is essentially a highly effective form of upselling. By grouping multiple products together at a price that would be lower than their total cost if purchased separately, businesses give customers a financial incentive to buy more. Even though the margins on individual products decrease, total revenue and overall profit increase.
Branch into New Markets for Additional Customers
Businesses that manage to enter new markets have a whole new group of potential customers to sell to, but sometimes the cost of entering a new market outweighs the potential revenue gain.
To minimize the risk of going into a previously untapped market and maximize its potential effect on cash flow, businesses should start small. A small investment that produces regular sales will provide an ongoing boost to revenue and cash flow, and operations can be increased once enough working capital is saved up to grow the business’ presence in the market.
Accept Credit Cards to Increase Customer Convenience
The convenience that credit cards provide offers two revenue-generating opportunities for businesses. First, businesses that accept credit cards appeal to a larger market because some customers will only purchase from companies that accept the payment method. Second, customers spend more when paying with credit cards, so average transaction value also increases.
Grow Your Business’ Revenue
If you’ve been looking for ways to improve your business cash flow or accumulate more working capital, use these tactics to grow your business’ revenue. The benefits for your business will be multifold.