As we close out the first fiscal quarter of 2022 I am reminded that we’re not through with this extended season of uncertainty. COVID-19 mandates are not the only thing that is being lifted. Costs for business owners are increasing to the point that profitability is likely at risk unless preventative action is taken.
Here are 10 practical tips on how to offset rising costs to manage your bottom line.
- Raise prices. An obvious step but yet one that entrepreneurs struggle with the most. Generally speaking prices can increase by 20% before it starts to grind into customer retention. In the long run your customers want your business to survive so keep that in mind when you are struggling with this decision.
- What can you upsell? The longer you are in business, the more upsell potential you have. Consider charging for elements you previously gave away for free. And consider what else you could offer that your customers may really appreciate?
- Do you have a premium offer? Every category has the potential to have a premium customer segment that would love to pay more for additional value (even if that value is truly just perceived). If you have been in business for more than 3-5 years you are likely due for a premium offer by now. Just think about it and be bold.
- Offboard unprofitable customers. Over time some customers never reach profitability. It’s pretty typical that these customers are cheaper and needier than your average and they are hindering, not helping, your bottom line. Don’t forget to consider the hidden costs like staff morale on keeping these types of clients happy. Releasing these clients can send a positive message to your team.
- Add in variable compensation. These days almost every company is losing staff for higher salaries. This is triggering founders to increase salaries dramatically across the board, but is that the right decision? While a response may feel necessary, consider some alternatives like building in a variable compensation component to your comp plans which increase the likelihood of a win-win result.
- Consider other free perks. Not all employees are motivated by money. Some employees value Impact and Flexibility and others value their Peer Relationships. As staff exit the workforce there may be an opportunity to shift some employees to part-time, actually reducing staffing costs. Thinking outside the box can help the bottom line.
- Drop some subscriptions. It’s easy to accumulate subscriptions over time as they run through corporate credit cards. Take the opportunity to review all subscriptions and aim for the bottom 3 performers.
- Negotiate volume based pricing. Take a look at your vendors and reach out to see if you can get some discounts for 3 year engagements for example. In 2022 anything is possible.
- Collaborate more. Who else is servicing your market? By collaborating with other like-minded businesses you may earn valuable referrals and increase customer value.
- Leverage grants. There are a number of grants and subsidies from the various levels of government that are helping to offset business costs, especially around employment. Take advantage of those available to you.
For more information and to inquire about our services and how we can help you increase your profits in 2022, contact us.
Author: Susan Richards, Co-Founder