For a small business, any money lost is a loss for the company as a whole. With minimal budget and even fewer customers or clients, you count every dime, and something as simple as not emailing customers regularly could be costing you.
Before you can determine how you’re losing money and how to fix it, set a benchmark for revenue loss. Melissa Krivachek, President of Briella Arion, suggests using the following simple equation:
Desired Monthly Revenue – Current Revenue = Revenue Loss X12 (months) = Yearly Revenue Loss
When you begin to implement changes to fix your money holes, you can determine what’s working and what’s not based on how your monthly revenue increases. Now it’s time to analyze what you’re doing and where you can gain some of that revenue back.
Consider the following opportunities and where your organization stacks up.
Lack of Email Engagement
Marketers agree, year after year, that email is the most effective way to reach customers. If you want to boost engagement, the key is making the emails valuable. A 2016 Fluent LLC. study found that 15 percent of consumers find marketing emails “often” or “always” useful, while more than have, 57 percent, said they’re “rarely” or “never” useful.
To avoid fatiguing your subscribers and ensure that all of your emails provide value, spice up your email marketing plan.
There are many types of emails you can send on a regular basis to keep things fresh and effective, including the following:
- Transactional: Transactional emails get 8 times more opens and clicks than any other type of email and have the potential to generate 6 times more revenue, according to Experian. These emails include: purchase receipts, password reset, account confirmation, notifications, shipping confirmations, etc. Make the most of them by adding related information, products, services, which can boost your upsell or repeat purchase potential.
- Value-add: These emails contain interesting and valuable content related to your business. Examples include: monthly content sharing and seasonal guides.
- Promotional: Promotional emails encourage purchasing by giving subscribers a new deal or discount.
- Announcements: Instead of waiting for your current and potential customers to learn about new product updates or service offerings, you send an announcement email instead.
Poor Customer Service
An unhappy customer is a big problem, especially as a small company trying to build a reputation and customer base. For every customer who complains, there are six more that don’t say anything to you—what’s worse, 82 percent of consumers who had a bad customer service experience left the company (both according to GrooveHQ).
The best part is: improving your customer service isn’t hard. Start by improving your processes so that every single customer has the same stellar experience, regardless of who they’re working with.
This process should include which questions to ask, follow up requirements (email, phone call?), record-keeping and more—all of which streamline the process, making it less stressful for customers.
Krivachek says this is the number one business killer—if no one knows who you are or even that you exist, it’s hard to make money. Luckily, this is one of the easiest problems to fix if you’re willing to put in the effort. To take yourself from obscurity into the industry of known brands, you have to put yourself out there, leveraging the audience of other people and brands, and that takes time.
If you’re ready, here are a few ideas to try:
- Be a guest or a sponsor: On the local news station, at a community event, or on a podcast, blog (guest posting), or webinar.
- Ads: Paid social, Google and Bing ads will put you in front of the people who are most likely to buy from you—right then or later, when they’re ready.
- Engage on social: Social is hard to quantify, but if you have social pages and aren’t engaging with fans, you’re keeping yourself out of the spotlight. Comment on related posts and like related photos as much as possible.
Coupons and Discounts
Using coupons and discounts to drive sales is smart because 90 percent of consumers use them, according to the Valassis 2017 Coupon Intelligence Report. However, discounting your services or products is inherently dangerous because you have to sell more to make the same amount of revenue. Therefore, if you don’t choose the right type of discount, or don’t do the math, you’re more likely to lose money.
However, when done right, there’s an opportunity to make upwards of $29K in monthly revenue from coupons alone, according to a 2016 retailer coupon survey.
To make your coupons more valuable, use the following tips:
- Choose the right type: The same retailer survey found that Sitewide, All Products (discounts that can be applied to any product on the site) was the most effective discount for maximizing sales.
- Choose the right amount: When you know your profit margin, you can determine how much a discount will cut into revenue and then make a plan to maintain that margin. To find your profit margin, use the following equation:
- (retail price – cost) ÷ (retail price)
- Do the same for the discounted price; determine the difference between the two, and make a plan for how you’ll reach the same amount of revenue, or more.
Incorrect Product Pricing
Whether you price too high to too low, you risk losing money. Price your product too low, and you devalue your product or service. That’s not all: “If you set your prices too low, more customers will buy your products. Sure, a lot of people buying products is a good thing. But, the prices might be so low that you barely turn a profit. People might be willing to pay more than your ultra-low price,” says Mike Kappel, CEO and founder of Patriot Software.
Price it too high, on the other hand, and you’ll lose customers who want to pay less for the product or service and can with a competitor. In either case, you lose—which is why it’s time to revisit your pricing. Use the equations and guidance from Strategic CFO to determine markup, operating profit margin ratio analysis and more.
Get It Back
There are many ways your business could be losing money, and these are just five common mistakes. Keep them in mind as you assess why your business is losing money and how to gain it back.