Regardless of the wider economic climate, individuals must always look to maintain a frugal and consistent lifestyle. This has the potential to create long-term financial stability, as it enables you to control expenditure and eliminate impulsive or reckless spending during periods of prosperity. As a result of this, you are more likely to save a higher percentage of your income and build an individual store of wealth that will help to sustain you during a recession or economic downturn.
The same principle applies to business owners, who should look to create a viable and stringent budget that can be maintained regardless of the economic climate. This will help to drive consistent levels of growth, although it may occasionally require entrepreneurs to improve and develop their venture without significant investment. The good news is that this is easier than ever thanks to the development of technology such as mobile apps, with more than 1.55 million already available through the Google Play store.
3 Tips for expanding your business without huge investment
So, let’s take a look at three ways in which businesses can look to drive internal growth without being forced to spend huge sums of money.
1. Share the savings made on capped credit card payments.
Last year, the European Union Commission (EU) announced that the interchange fees applied by Visa and MasterCard will be capped. The new legislation began to come into effect from March this year, with Visa now charging interchange rates of 0.2% and 1 pence per transaction. While MasterCard is scheduled to adopt a phased and structured approach towards implementing new interchange rates, business owners can expect to feel considerable benefits over the course of the next 12 months.
In instances where merchant account providers (who equip companies with the hardware to accept real-time card payments) pass these changes onto businesses, firms can expect to benefit from reduced credit card charges. These could equate to individual savings of 0.4%, which will accumulate quickly across multiple or bulk transactions.
Should you then choose to restructure your pricing in a way that shares these savings with your customers, you can compete more aggressively with rival companies and sell higher volumes without impacting negatively on your margin.
2. Diversify revenue streams through third party sales.
For product orientated businesses, one of the biggest challenges is reaching a large and motivated consumer base. This has been negated to some degree by modern technology, which has created multiple channels through which brands can implement a targeted marketing strategy. Many of these are accessible in real-time through smartphones and tablets, and this not only increases the reach and impact of your firm but it also offers considerable flexibility to customers. In the UK alone, an estimated 40% of shoppers believed that it was beneficial to make a purchase from retailers that sell through multiple channels.
Another benefit of selling through multiple channels is that it provides you with the opportunity to diversify existing revenue streams. This is why sites such as Amazon have proven so successful since their inception, as they offer third party sellers access to their audience and resources in exchange for commission of anywhere between 6% and 8% depending on the total value of the order. Although the commission will eat into the profit margin for each individual sale, this represents a relatively small fee that will allow your firm to drive a higher volume of sales and create an entirely new stream of income. Given the sheer size of Amazon’s consumer base, it is ideal for new or burgeoning businesses that have yet to build a loyal following of customers.
3. Stop servicing break-even customers.
Profit is the lifeblood of business, as it represents the difference that exists between a firms total cost base and its sales revenues. This is why it is the single most important business component, as even companies with large turnovers can fail if their costs exceed this sum. As a result of this, there are numerous techniques that enable you to leverage turnover and translate this into higher profit margins.
One of the most simple is to draw a clear distinction between increasing sales and boosting profit, as it is possible to achieve the latter while also reducing turnover. If you were to stop marketing your products or services to unprofitable customers, for example, you will be able to deploy more time and resource into those who have the potential to drive significant growth.
This process starts with a comprehensive assessment of your existing customer base, using open-source, analytical CRM packages such as Vtiger and Zurmo to measure how much consumers spend and the estimated cost of retaining their custom.
If you find, as an example, that 20% of your customer base is contributing 150% of your total annualized profit, you can prioritise these clients and allocate your marketing resources accordingly. As a result, you will spend less on customers that break even or even cost your business money, driving growth and profitability as a result.
The final word.
As these techniques show, it is possible to grow your business, its sales volumes and profitability without spending significant sums of money. As a result, these methods can be sustained or continued during times of austerity and recession, allowing your business to evolve while others struggle.
Lewis is a blogger and entrepreneur from the UK. He writes for sites such as Career Addict and Life Hack, while he also operates a small business venture called Link Through Words.