More Strategies To Consider In Tight Economic Times
In a recent special edition of Inside Strategic Relations entitled Solutions for Slow Economies, I shared a number of strategies to increase revenues and address factors that erode price. Here are a few strategies I garnered from reader feedback:
Keep your overhead rates low by focusing on critical tasks. Focus teams on core objectives that generate revenue and improve margins. These tasks include closing new sales, addressing customer concerns, or reducing the number of steps in a process while producing the same results. Set objectives around overhead as a percentage of revenue.
Reduce fixed costs while maintaining quality with limited capital. Look for waste in production systems (of both time and raw materials), and recover costs by reusing materials. Focus on tasks that are frequently repeated or have a high costs to implement. This is where understanding life-cycle and internal processes helps your organization.
Focus extra effort on bringing in overdue receivables. Your collection procedures are critical during any cash crunch. Increasing revenues or profits does little good if you can't collect the funds due you. Don't just look at collection procedures, but reasons customers don't pay on time, including product quality.
Keep a keen eye on supply and demand as it relates to your average variable costs. Produce the most optimal profits for your current numbers, a tight market isn't the best time to seek premium pricing if suitable volumes can't be reached to reduce production costs. Adjust your prices to produce a steady cash flow, but promote the lower rates as your way of addressing the tough times.
Find profitable niches in your current customer base by observing trends in industry categories. Overlay your customer buying behavior with industry codes (SIC, NAICS) to find pockets of customers who are producing net profits for your organization. Concentrate your efforts on those industries that are producing the most favorable results for your organization.
Identify products your current customers are most likely to purchase. Selling to your existing customers reduces your costs per sale. Details you learn about buying trends will help you understand what else current customers can purchase. Offer these items in outgoing sales calls or direct mail, reach out to likely buyers.
Connect with your above average customers regularly. Ask two critical questions, (a) What do you get from our company that you can't get from anyone else, and (b) What do you want and would buy that we haven't offered you? By connecting with those customers worth most to your business you can find out exactly why they buy and what they will buy.
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