Want to increase your business profit by 25% - here's how!

How's business?

If your business could do with a bit of a boost, then this episode will let you in on a secret that will help you increase your profits. And, it's probably not what you think!
 
With the cost of living on the rise and new clients harder to come by than ever before, we're sharing a simple, inexpensive and fool-proof way to help your business thrive. 

This episode is full of of actionable tactics, stories and strategies that will rekindle your business spark and help you make more money in the process. Join us, transform your client retention game and turn your business into a profit-generating powerhouse.

Transcript

Speaker 1 0:01

You're listening to the Secrets of Successful Business podcast, your go-to source for business tips, tricks and proven strategies that will help you create a streamlined and profitable business. We chat to the best minds in business about their journey. It's my business and I'll do it my way, how they started, rather than going harder to get more focus on growing more with what you have. What they learned along the way. How long are you going to give this?

Speaker 2 0:29

What compromises are you going to make? Just because you can do it doesn't mean that you should do it.

Speaker 1 0:33

It's really important to remember that it's a long game and, of course, we'll ask them for their secret source for creating a successful business. If you're not feeling you're not doing it right, you should be struggling at times. That is part of the journey. Join us as we take a sneak peek behind the curtain, talk solutions for those business pain points, working smarter, not harder, mindset and the challenges of bidding it all in with the demands of today's busy life style. If you're a business owner, side hustler or just starting your business journey, this podcast is for you. Now here's your host, business coach and content creator, justine McLean from Fawcay Creative.

Speaker 2 1:13

Hello and thanks for joining me on the podcast today. In case we haven't met, I'm Justine, a small business owner on a mission to uncover and share the secrets of creating and running a profitable, sustainable and successful business. I've been in business for over 20 years now and I get to use all that I've learned along the way to help other women in business reduce the overwhelm, gain visibility around their numbers, charge what they're worth and make more money. It's about designing a life you love that fits into your definition of success. So if I can help you create the profitable business you deserve, please reach out Now without further ado. Let's dive into today's episode. Hi there and welcome to the podcast Now. If you've been listening for a while, you'll know that I am all about creating profitable and sustainable businesses, and to do that, there's a number of things that you need to put into place, from your definition of what your success journey is to your pricing, keeping an eye on your expenses and everything in between. But with business being a bit ho hum in 2024, particularly for a lot of service providers that I've been talking to I thought in today's episode I would share with you how it's possible to increase your business profit by 25%. And it's not just me making up numbers here. There was actually a study out of Bain and Co and Harvard University a few years ago that shows that an increase in customer retention by only 5% can actually lead to profit growth of between 25 and 95% over a certain period of time. Yes, it was specific, but a little bit vague.

Speaker 2 3:00

Now, if I surveyed a room full of business owners and I asked them for the fastest way to increase their revenue and maybe unlock their earning potential or become more profitable, what do you think they would choose? What would you choose? Would it be engaging a new client, pulling all the new people or working on repeat clients that you already had in your business ecosystem? Now, I'm not sure what you answered, but when I asked this exact question not long ago during a talk to a very large group of business owners, the most popular answer was by far option A getting new clients. These, the people in this audience, were so determined that this is what they needed to do. When I asked for a show of hands about how they would go about doing it, there was everything from running Facebook ads to increasing the social media presence, to having a sale, having multiple discounts here and there, but there were only a handful of people who said that they would actually reach out to their old clients, because the reality is that most business owners think that getting new clients through the door is the fastest way to make more money, and while I absolutely know that there are a lot of pluses when a new client shows up and comes into your business ecosystem, I really believe that the key to creating a sustainable business is all in the understanding of how to retain and re-engage your former or existing clients.

Speaker 2 4:31

Why is that? For a start, retaining or engaging a former client will cost you way less time and way less money than bringing in someone new, and you certainly don't have to think about Facebook ads or discounting, which is a massive relief for me. But if you've been in business for a while, you've probably also heard about something called the 80-20 rule. It's also known as the Pareto principle and the 80-20 rule. We can apply that to lots of different aspects of business, but in a nutshell, it asserts that 80% of all outcomes or outputs in your business could be in your life as well result from 20% of all causes or inputs. In other words, prioritising the 20%, whether that's getting new customers, retaining old customers or some other part of your business will always give you the best results.

Speaker 2 5:23

And more recently, dan Sullivan in his book 10 times is easier than two times, talks about a similar concept in my opinion. He says that instead of thinking you need to do 10 times the work to get 10 times the reward, the best way to get a 10 times return in your business is to first focus on your four most important time freedoms, so he identifies those as time, money, relationships and purpose. And then, as you embrace the understanding that your time is actually 10 times more valuable than anything else, you start to view everything else under that lens. So if we tie that back to the 80-20 rule, it means that you'll spend 80% of your time your most valuable resource working to look after the top 20% of your clients with a view to retaining them and increasing the lifetime value they bring to your business. And if you want to think of it in even more simpler terms and you think of every 100 customers that you have, your aim is really just to keep and nurture the top 20, the best 20 customers that you have, and to actually get rid of the 80 altogether and for most business owners, getting rid of 80 clients would send a chill down their spine. 80% of their revenue chill, absolutely.

Speaker 2 6:43

But when it comes to business profit and when I think of the 80-20 rule, it also means that 80% of your profit is likely to come from 20% of your customers, and certainly when I do the numbers in my business, that is absolutely true. It's that same 20% that keep coming back for more, and they're the ones where I make the maximum profit. So it's important to identify that 20% and then maximize the time that you work with them, and that is an absolutely easy way to stay on the path to profit and really to create a sustainable business. And if you relate that back to a cost per lead to getting someone new in your business, it actually makes a lot of sense because by retaining somebody you already have, there's no outlay on marketing, on advertising, the time and money that it takes to do that. Fewer resources are used to set up and onboard an old client because they're already in the system, they know what it's like to work with you, they know the exchange they need to make to get their project going and you're more likely to complete the work faster too, because, as the service provider, you're going to know exactly what they want and there'll be less back and forth asking questions, and so, essentially, you can provide them with what they need with less corrections required and in a faster timeframe too. So it's maximizing your time, your energy and your profit in the process.

Speaker 2 8:11

But regardless of whether you choose to do that or not, simply looking at the retention rate in your business so the number of clients that you manage to keep in your ecosystem and according to Bain and Co and Harvard Business School, increasing that by just 5% you can increase your overall profit, and they say between 25 and 95%. I guess it depends on the sort of business you have. So how do you go about it? The first thing you need to know is your current retention rate, so that way you have something to aim for, because there's no point shooting to increase something by 5% if you don't know what the starting number is, and we're looking for that starting number. So how many of the current customers that you have, or how many of your overall customers do you manage to retain? What's the number, what's the percentage? And then we're just looking to increase that rate by 5%. So if we're talking about 100 clients, we're looking to retain five of them. Five additional clients.

Retaining Existing Clients for Increased Profit

Speaker 2 9:14

If we're looking at the 20, we're looking to increase that by just one customer, and then, in my opinion, the next best thing to do is to identify your best customers. So it could be your top 20, it might be your top 30, but look at those and think about okay, if I'm not retaining them at the moment, or I could potentially get more work out of them, how am I able to do that? And while this idea seems pretty straightforward, the reality can be a little more complex, and that's largely because, just like us, our customers are often guilty of looking for the shiny next best thing and they forget all about us. I know, if you've been listening for a while, you would have heard me say this before. It doesn't matter if you've provided the most excellent service and have a testimonial from them to prove it, but if that business over there is doing something similar or gosh, that person I follow on Instagram says that this person over here is really good your customer could be off in a flash out of your orbit and working with someone else before you even know what's happened.

Speaker 2 10:18

Naturally, as business owners and as humans. If we do a good job for someone, we expect to stay on the top of their list. We expect our happy customers to keep coming back to us for more at some point, whether it's immediately or some point in the future, and so human nature says that we don't tend to chase them. We also don't want to be that annoying person, and I think as the business of business takes over, then we just forget our old customers altogether, just totally forget they exist, and instead we're on the lookout for the next new customer. But, as I've already said, getting that new customer can be expensive. So when you put that into the context of the 80-20 rule, you really have to wonder why you'd ever bother chasing after someone new when you've got all these potential sales, all these existing clients that might have forgotten about you sitting on the table.

Speaker 2 11:05

Don't let your customers forget about you. Remind them that you're still here, whether you're just following up about the work you've just completed or maybe suggesting another way that you can work together, creating a special VIP offer for your preferred clients. Think about what it is that you can do to keep your customers coming back for more. I've just tried this with a couple of my clients who were absolutely struggling to find work, and it was pre-Christmas and we were looking at the February March period and thinking, okay, january is traditionally quiet, but February March we've got no inquiries. Things are looking really dire. In each case, the clients had staff that they had to pay, so they had that cost liability that they could not negate. They needed to find the money to pay their staff at the very least, and so that was one of the things I suggested Go back, have a look at your old client list, see who you can talk to, see who might be interested in coming back and working with you again. And within two weeks, each of those clients had booked out February and had started taking bookings for March. So it is possible. I have absolutely seen the proof.

Speaker 2 12:18

But the word there, the important word, is ask, because if you want to hold on to the 20% of your existing clients, those people who have been in your ecosystem, who really love you, who you get the most value out of, you have to ask and you have to keep asking. And if you want to increase your business profits by at least 25%, so you want to retain 5% of additional clients, then you definitely need to ask so how do you do that you can reach out to your clients and let them know that you're open for work. If you don't tell them, how are they going to know? Just because you put something up on social media to say you've got two spots left next month doesn't mean that they're going to see it. But also let them know how you can help them because, remember, it's all about them. It's not about you.

Speaker 2 13:06

Sure, you might think it's about you because you've got to get the money in the door, but essentially it's about how you can help your client. So suggest one thing that you can do right now to make their life more manageable. If, for example, someone comes back to you and says, yeah, I can't really afford that right now, then give them a head list. Think about the five top things that you could do for them right now and say, look, I understand that you might not need all five, but number one and two are really going to help you and so I can offer you that particular service at this rate and that might be more within your sort of the budget that you've got to spend, but just suggesting that one thing that can make their life more manageable right now. That can take a bit of that pressure off. You would be surprised at how many people will turn around and say yes Now if you don't have an email list.

Speaker 2 13:58

I talked about this in last week's episode. If you don't have an email list, create an email list and add your existing clients, of course, with permission. Make sure then, once you've got them on the list, you nurture them, that you have that special email that you send out to those key clients, those VIPs, to let them know about the exclusive offer, the thing that they would be more likely to take over everybody else. And, as I said in last week's episode, don't just reach out when you're selling and need more money, but share those tips and strategies that really can help your customer at no cost to them, because that's a really easy way to stay on their radar and also keep them as the loyal, engaged clients that they have been as you go forward. I think the thing is that your clients need to be reminded that you are around, and if you're not the one who's reminding them of the great work that you've done and what it is that you can do for them, then, as I said, nobody else is going to tell them. And if, for some reason, they can't use your services right now, what you can do in sharing that you are open for work is. You can ask them to recommend you. They can refer you to someone else for free, or, if you're inclined to you, could offer them a referral fee as an incentive to refer you to someone else. And if that new client if the person they've referred signs on the dotted line comes on board and takes up one of your services, you can give them a kickback 10%, 20%, totally up to you, but that is another option too. And just a final word on asking ask your happy clients for testimonials or Google reviews, because if you don't ask, you don't get. And when you do get those testimonials, make sure you store them in one place and then you use them in your marketing.

Speaker 2 15:52

So, as we wrap up today's episode, if you want to start increasing your profits whether that's by 25% to 95%, as suggested by Bain and Co and Harvard Business School, or if you're just after a couple of percent increase right now the best way to do that is to retain your existing clients and to try and increase your retention rate by at least 5%. That 5% increase is going to save you time, money and effort on onboarding. And that is the secret right there that time, money and effort that you save. That's where you're going to get that bump in your profit.

Speaker 2 16:35

So, as you go forward and you're thinking, how can I become more profitable, how can I get more money in my business, decide who are your 20 top clients. Who are the people that you really want to work with and it doesn't just have to be the 20 top clients. Who are the 20% that you would be happy to hold if you were told that you needed to peer down your business and you needed to get rid of 80% of everyone you worked with, who are the 20% that you would hold? Make sure that 20% are the people that you're really looking after and that are already in your ecosystem, that you are regularly working with, and if they're not, reach out to them and then, when you've got that 20% better down, look to start increasing. That 5% is going to be an extra bump in profit every single time. So I hope today's episode has helped you and I hope it gives you some inspiration, particularly if your business is a little bit flat right now, and until next time, keep living your definition of success.

Speaker 1 17:40

Thanks for listening to the Secrets of Successful Business podcast. For more information on all things business, head to focicomau and make sure you hit subscribe on the show so you don't miss another new episode. If you're enjoying the show, please give it a quick rating or review, share it on your socials or with friends who might enjoy it. Catch you next time.