A business mentor is someone who has grown multiple businesses and often in different industries. They learn from the businesses they work with and advise as much as they do from their own experiences in business. That frequently means they have strategies up their sleeve that many small businesses aren’t aware of or are using to grow their business.
This blog post will share some little-known strategies to increase profits faster in your business from an expert in business growth strategies.
If you have employees or intend to, this content will be relevant and beneficial for you.
What is a Profit Vs Income Mindset
When a business first starts, its primary goal is to make sales so that it can grow and hire employees. That makes lead generation and servicing customers the initial focus.
When a business grows beyond the initial start-up solo-operator phase and moves into the early management stage where the business has five or more employees, it’s time to get focused on profit and specifically, profit margins. That’s where the thinking of a business mentor can be vastly different for many business owners.
Two businesses in the exact same industry could start and both reach $1,000,000 in income. One may have a net profit of $80,000 with an 8% Net Profit Margin while another has a $200,000 net profit and a 20% Net Profit Margin. Even though the businesses are in the same industry there is a big difference in profitability. This is what’s happening in every industry in the world. All businesses are not the same due to the decisions and focus of the business owners.
A profit mindset is very different from a productivity and sales mindset. It’s where you’re focused on increasing efficiency, prices, and output for the same input.
Profit margin is like free money accessible in every business. It starts by measuring all aspects of the business to determine what’s working and what’s not, but also to find profit-increasing opportunities.
Raising Prices without Lowering Profits
Everyone in society knows prices will increase over time. Raising prices is the best way to increase profits and specifically profit margins.
There is often a fear response to raising prices, which is that income will drop meaning cash levels will drop.
Profit is more important than income. Without net profit, there is no money to pay for marketing or to hire more employees.
In the two businesses of $1,000,000 income, one will have higher prices than the other, yet it has still reached the same income as the one with lower prices. This again is what’s happening in every industry in the world.
Raising prices has fear associated with it, but here’s the rule to keep in mind. Overcoming that fear is where a business mentor can assist.
What a mentor know is that it doesn’t matter if you raise prices as long as the Net Profit doesn’t decrease.
If you raise prices by 10% on the $1,000,000 business, that means it will have $100,000 income, as long as no sales as lost. That $100,000 is all profit so in the first business that had $80,000 net profit, it would increase to $180,000.
With the much higher profit (almost double) the income can reduce by quite a bit before the net profit is lower than the $80,000 starting figure.
Raising prices is a strategy very few businesses consider due to the risk, but it’s one strategy that needs to be a high priority as net profit matters most in a business. All things being equal a business with a higher net profit margin business will weather more marketplace changes.
Increasing Conversion Rates from Leads to Sales
Businesses commonly have two or three conversion rates. There is a marketing conversion rate from website visitors to leads and from leads to sales. The other conversion rate worth considering for high-sale value businesses is how many meetings or quotes a business carries out from the leads.
In high-ticket sale businesses, such as remodelling bathrooms and kitchens, major renovations on homes, and hundreds of other businesses that provide a quotation meeting prior to giving a price, the lead to quote conversion rate becomes relevant.
A Sydney builder was struggling to convert leads into sales and had a 12% conversion rate for their $2,000,000 income business. Their average sale value was $45,000 at the time. Their problem was they weren’t ‘qualifying’ leads. They booked every phone call for a design consultation with their two employees which took about 4 hours in total to complete.
By qualifying the leads with a one-page script 60% of all leads were deselected and referred elsewhere for various reasons that were identified. This allowed the business to experience rapid growth of 60% without the need for hiring more design consultants.
The figures for the conversion rate for quotes to sales or from leads to sales have many opportunities and are some of the most important for service and manufacturing businesses.
Conversion rates vary by different factors and one is the lead source. Most small businesses will have 4 to 10 or so different lead source types and identifying them is a worthwhile strategy.
Look for high conversion rate lead sources because they are often the best to focus on for increasing leads.
An air conditioning installation service business working with a business mentor pointed out that their leads from real estate agents had a 72% conversion rate, the highest of all their lead sources. That much higher figure showed that agents weren’t that interested in prices, they just wanted reliable, good quality service and fast response times so that their job was made easier.
By realizing this the business mentor recommended creating a vertically designed, DL-sized letterbox flyer to use to drop into real estate agents when driving past their offices while at work. This resulted in more leads and these leads was free.
Obtaining more leads for free is a great way to increase net profit and earnings.
Increasing Conversion Rate Strategies
- Improve the website with better headlines and images with happy people. Happy people have been proven to be the most popular type of image in advertising. Consumers don’t want to see photos of equipment, trucks, and machines, they want to see people. Changing the focus of the website to be people-centric has seen significant increases in conversion rates from visitors to leads.
- Change the verbal greeting used on phone calls from prospects. People want to trust businesses but also the people they talk to when considering buying. They don’t want to be treated like a number, they want to have meaningful conversations. People also buy from people they know better, like, and trust. One way this can be achieved is by changing the greeting used for incoming phone calls to this…
Thanks for calling (ABC Co), this is (First name).
The greeting needs to sound melodious and friendly in tone, not robotic.
This greeting can make a significant and noticeable difference and has seen income increase by 10% just by using it.
- Study and learn about DISC Profiles. DISC Profiles describe 4 behaviours of people – Dominant, Influence, Steadiness, and Compliant. Every person has a DISC Profile and with it a much-preferred way of being spoken to. When you communicate with a person in their preferred way, sales naturally increase because rapport increases, and rapport is an essential ingredient of trust.
One business mentor has been introducing DISC Profiles to hundreds of businesses for decades and found that a 20% jump in conversion rates is commonly achieved within the first month and that jump is equal to the increase in annual revenue. That means this strategy is one of the best, and also the greatest in terms of ROI to learn this business growth strategy.
Being trained by a business mentor who is an expert in DISC Profiles is recommended.
- Invest in sales training. Sales training is not about being pushy, annoying, and obnoxious, and those people who are, do not represent the best in salesmanship.
A great salesperson is not recognized. They are the friendly, helpful people who educated you and assisted you with asking questions to get to know you better in order to make a matched recommendation to your buying needs.
A great salesperson is not someone you consider a salesperson when you’re enjoying buying from them.
That’s what professional salesmanship and top-notch quality sales training are all about.
Top-quality sales training is about building rapport through DISC Profile knowledge. It’s about the art of asking quality questions to have people feel like you genuinely want to help them. It’s about completely removing all tension, awkwardness, and uncomfortable moments from the conversation so that people just want to buy.
Top-quality salesmanship makes selling effortless and enjoyable and if that’s not what you’re experiencing now then you’re missing out. Consider professional sales training because it can jump the income of a business up to and beyond 300% in one month as a leading business mentor has found with its clients.
- Focus on integrity in all aspects of your sales process. Integrity means to deliver what you say.
Instead of saying you’ll be there to do a quote sometime in the morning tomorrow, be specific and say our person will be there at 10 am on the dot and then make sure they are.
Being specific with wording with customers demonstrates confidence in what you are saying. It creates an opportunity to be accountable and to show that being your word is important and that the customer is important.
Look at where else you can be specific with your wording with customers with your proposal or follow up etc.
Integrity is another ingredient of trust. We don’t trust people who don’t do what they say, and the opposite is true. In business, if you want to be trusted then look at the language you’re using and be more specific.
Measuring – the Gross Margin Increasing Strategy
In business, a way to approach increasing net profit is to focus on increasing gross profit. Take a service and manufacturing business. It typically has materials as a Cost of Sale but the employees carrying out the service or manufacturing work are also part of the direct cost of producing the sale. That means their wages also need to be allocated to the Cost of Sales.
When this is carried out then a better gross profit and also gross margin figure is obtained.
There are many ways to increase the productivity in a business that the technical or ‘income-producing’ employees are achieving. When productivity increases for the same wages paid the gross margin increases. When gross margins increase so too does the Net Profit Margin.
This then is an area where an experienced business mentor will focus a lot of attention on various strategies.
Strategies to Increase Gross Margins
- Introduce weekly team meetings with all employees.
Happy people are more productive and what that means is that happy people do more work for the same wage and that increases gross margins. While many business owners know this, they don’t have a happiness-increasing strategy, so the profit margin increase can’t be experienced.
Employees are like all people and have basic emotional needs. When those needs are experienced they will become happier.
A team meeting is not a lecture where the owner stands and faces all the employees, like an audience for a lecture. A team meeting is where everyone sits in a circle and each person gets to speak about their role and what they’d like to see improved.
Feeling listened to and respected makes employees happier and that’s what comes out of a team meeting. It’s amazing how this simple strategy can make employees happier very quickly.
- Introduce figures to the team meeting.
In a service and manufacturing business, the technical or income-producing employees make up the majority. Their performance can be measured every week by tracking their times on jobs to determine the time cost against the jobs and with that the gross profit and gross margins of jobs.
The gross margin in a business is what can be considered the “Game Score” of the business. Just like when two football teams play and if you miss it, you want to know the game score, it’s the figure that tells you a lot about what happened.
In business, it’s exactly the same. The Game Score in business is the gross margin and that’s what your team needs to know and hear every week.
The gross margin figure on a job or all jobs for the week becomes a feedback loop of how well they are performing in their work. Sharing the game score of your business every week on the average gross margin of all jobs can have powerful effects on your team’s motivation and interest in seeing your business improve.
Imagine if you were on a sports team and one day a new coach arrived. That coach said no scores of the game are to be discussed, and they would prefer if the players had no idea of the game score or any figures associated with it.
Would you want to play with that coach?
Probably not, but isn’t that what all businesses are asking from their employees when they don’t tell them any figures about the business they are working in?
Sharing gross margin figures makes employees interested in them. When they get interested in them, they start to realize they affect them and that they can improve them.
People love feedback. We have a basic desire to be more efficient so when we know the score or time it takes to do something we naturally get interested in improving on the figure. That’s what happens when you show gross margins to your team.
There are a lot of strategies available to grow your business faster. Having a team that is focused on and as interested in the numbers as much as you are makes growing it a team effort. Just like in sports it has to be a team effort to grow a business.
Someone you may consider having on your team is a business mentor. They’ve been where you are and know the strategies to grow businesses faster but also far more efficiently with higher profit margins.
When profit margins increase it can make a business mentor one of the best investments there is. For every 1% of the increase in net profit on $1,000,000 income, that’s a $10,000 increase in net profit. Increasing net profit by multiples can and has been achieved by many businesses that engage a business mentor. Perhaps it’s time you consider one for your business.