In the last post, we looked at how reducing costs 10% for your Kona business can have a large impact on how much your business is able to generate in free cash flow. Another way to increase your free cash flow is to increase sales. Note, however, sales at any costs, especially when expenses are uncontrolled will not have as big an impact as reducing costs.
So, we’ll use the numbers from the previous example: a Kona business that generates $300,000 in revenue with 80% expenses, resulting in a net profit of $60,000. If you increase sales 10%–a good number for a mature business—you’ll see about $6,000 in profits more at the end of the year ($300,000 x 10% = $30,000 additional revenue – 80% costs = +$6,000).
How can increase sales 10% for your Kona business?
Add new products or services. Take a look at the competitive landscape for your business in Kona. Are there businesses that are doing a poor job of meeting their customers’ needs? At Kona Impact, we went into several business areas due to the lack of reliable providers in our community. Another place to look is at similar businesses on the Mainland. Are they offering products or services that you could add? I’m not a fan of chasing fads, but if you can find products or services that will add long-term value to your company, consider growing by expanding your offerings.
Increase prices. There is always a fine line between charging the right amount and charging too much for your products or services. Too much and you’ll lose loyalty and run the risk of a lower-cost competitor entering emerging. Too little, and you’re leaving money on the table. From our experience at Kona Impact helping hundreds of businesses over the years, we find that businesses, especially startups, often charge too little out of fear of losing (or not gaining) customers.
Grow your online presence. Truth be told, most Kona businesses do a poor job with their online visibility. The cardinal sin, of course, is having no online presence. An old, outdated website is another big problem for many local businesses. The gold standard: modern, dynamic website that is mobile friendly is not met by most Kona businesses. Getting your online presence right can make a huge difference in the number of new customers you attract.
Expand your marketing. It’s easy to become complacent when times are good. Many companies reduce marketing expenses because business is good and they are running near capacity, so additional customers or sales are thought to be unnecessary. There might be some truth to this, but it is a bit myopic; the future is certain to bring ups and downs in our economy, so preparing for the bad times now is a prudent strategy. Even more important should be the goal of landing high-profit, low stress clients. For example, Kona Impact would love to see more convention and hotel business and less sole proprietors that want a business card design. We want both, but one is certainly going to add more to our bottom line. Expanding to direct mail, every door direct mail, online advertising, event sponsorship and getting some help with your marketing are sure-fire ways to do this.
Reach out to existing customers. This, in our conversations with hundreds of business owners a year, is one of the biggest misses for local businesses in Kona. It is much easier to sell to a business that knows and trusts you, than to prospect to new clients. Simple things like a call, a newsletter or thank you notes can go a long way to helping you sell more to existing customers or clients.
Kona Impact has been helping businesses in Kona, Hawaii grow for over ten years. We take a common-sense practical approach to dealing with the design and marketing needs of our clients. We don’t chase rainbows and ground our advice, services and products in what works. If you’d like to some help, give us a call at 808-329-6077.