6 Ways of Increasing Business Profit During a Recession
With the economy in recession, many businesses have faced the challenge of re-evaluating how they operate.
One of the most difficult decisions is whether to cut costs or continue spending. But which of these activities could help increase your profits to build a more resilient business?
Here are six ways you can improve your profit margin despite tough economic times.
1. New marketing strategies
Reviewing your marketing activities can help you discover better ways to make sales and grow your market share. Focus on communicating a strong unique selling proposition (USP) that helps your business stand out from the crowd.
Marketing can be costly, but even during an economic downturn, every business can access a range of free or low-cost tools which can help build your brand awareness and deliver your message. For example, through content and social media marketing.
2. Flexible staffing
Even with support programs like JobKeeper, loss of revenue has forced some businesses to reduce their headcount. Another option is to keep staff employed at reduced or part-time hours, which allows the business to be more financially flexible while retaining important skills.
Alternatively, you may be able to train employees to take on a wider range of responsibilities. Conducting a skills assessment can help you to identify potential skills gaps. Engaging contractors and freelancers can also help to reduce costs as needed.
Wages and working conditions are sensitive topics which could make or break employee morale. Remember to communicate any changes clearly and try to include employees in the conversation when seeking solutions.
3. New revenue streams
Diversifying your customer base can be a smart business strategy during an economic downturn as it can help minimise the impact of losing other crucial clients. This could involve pivoting your business to serve more essential industries where consumer demand is likely to grow, such as health, education or remote working.
Adapting your existing offering to align with these new consumer needs can be an effective way of increasing profits and expanding your market.
3. Cost efficiencies
Reducing business costs should never have to involve cutting corners or reducing the quality of your overall offering, including customer service. Instead, you should seek out ways to cut unnecessary fat to the end of reducing financial risk and waste.
For example, you could try to negotiate more flexible terms with your suppliers in order to still meet customer commitments without things piling up in the warehouse before being sold. Fine-tuning your sales forecast can help you find a sweet spot between supply and demand that results in steadier cash flow.
Try also reviewing your businesses operating costs, such as your commercial energy plan or insurance cover.
5. Focus on the customer
Being responsive to customer needs is a critical business strategy during a sudden market slump. It can help to improve retention and sales volume while giving your brand some extra gloss. This can involve:
surprising customers with discounts and giveaways
running a loyalty program tied to incentives
listening to and acting on customer feedback
overdelivering on your promises.
Good after-sales support is a vital part of any customer retention strategy, as it shows you are invested in providing a positive end-to-end customer experience.
Teaming up with businesses offering complementary (or even similar) products or services could also help boost your profits. This practice is also called co-marketing. Combined efforts may enable you to offer greater value to customers while also expanding your audience reach.
A good example is a food delivery service such as Deliveroo, which offers contact-free delivery options to encourage people to support their local hospitality industry, thus boosting each other’s business.
At the end of the day, every good business strategy should have a positive impact on your bottom line. Examine every corner of your business carefully to unveil where you might be able to cut costs and expose higher profits.
Notch Above Bookkeeping are Platinum Certified Xero bookkeepers and BAS Agents. We help small business owners across Australia (especially medical specialists such as dentists, orthodontists, optometrists and anaesthetists) to prepare BAS returns and streamline their bookkeeping processes, payroll and accounting records using cloud technology.