3 Ways to Grow A Small Business and Increase Profit

Most small food businesses slide backward over time hanging onto tiny margins. 

• They don't plan for long-term growth.

• They only adjust pricing when they're forced to when suppliers increase theirs.

• They don't invest in marketing until they're desperate and then expect quick returns.

• They don't build remarkable customer experiences that people want to talk about.

The result is, over time they run out of cash to fund growth and improvements to their business, and drift behind competitors.

I know this because I've been there.

I've built 5 food and beverage companies over the last decade and not all of them were successful.

Here are 3 principles about growing a business that took me 10 years to learn:

Step 1: Increase your margins

Either put your prices up or decrease your cost of goods.

You won't spend a single dollar and this will return the highest impact.

Margins Part One: Increasing Prices Is Scary

Each time I did it, I was absolutely shitting myself that long-term customers would get angry. I was fearful of facing them the next day and having to defend myself over the pricing increase before losing them to a nearby competitor.

But here's what actually happened...

NOT A SINGLE PERSON MENTIONED IT... NOT ONE!

Made me think I should have done it years ago.

REMEMBER

You must deliver excellent products and services as a baseline.

Increasing the prices of rubbish isn't going to work.

PREPARATION

Make customers comfortable seeing higher prices.

Offer a variation on core products for a short period at a higher price and gently lift your core range up to match a month later.

INCREASE QUALITY AT THE SAME TIME

Putting prices up sucks for everyone so deliver more value or fix a problem customers have at the same time.

You can always modify it later if it's not working.

We increased our service for a few weeks before telling customers about the price rise. We said something like "we've hope you've enjoyed our [specific increased service]. We really love doing [positive things for them]. To make it sustainable long term and continue leveling up our commitment to you, we will be adjusting the price of [selected products] from [date]."

If you need more detailed help on crafting a notice or email, click here

DON'T MAKE IT ABOUT YOU

It's getting tiring to hear that your company is facing increased pricing pressures and you need to put your prices up.

Even though I know it's true, you just made it all about you.

Instead, make it meaningful for the customer.

THE OUTCOME

What you stand to make will cost you nothing so it's all upside.

What you do with the cash could mean growth, talented people, less competition, and more freedom.

Here's a quick calculation of what happened to profit by putting coffee prices up by just $0.50:

300 cups per day x 0.50 x 7 days x 52 weeks = $54,600.00

What would you do with $54,000 of extra cash in your account for doing absolutely nothing?

Margins Part Two: Decreasing costs

Many small businesses forget that pricing is a negotiation.

I discovered the hard way that other people were getting a better deal than me just because they were skilled at negotiating.

The fact is, most people hate confrontation, including your supplier. Simply asking for a better price occasionally will save you a few percent. They would rather keep you than lose you.

Even though I got over my fear of negotiating, I still recognised that other people can do it better than me. I knew I wasn't prepared to push it beyond what I thought was fair and reasonable to establish the absolute bottom line pricing.

So I asked a friend to help me who acted as my negotiator on products and services.

This helped me stay one step removed from the process and maintain relationships with suppliers.

I'd highly recommend that you read some books on negotiating to give yourself the best go at it.

Here's one to start with that's full of info and easy to follow:

Never split the difference: Negotiating As If Your Life Depended On It - Chris Voss

Step 2: Increase the number of people through the doors or the frequency that regular customers buy.

Let me remind you that people aren't going to return for crappy products or service. So load up on getting this right first.

Without offering a better customer experience than your competitors, any money spent on marketing will be wasted because people won't return.

In a small business, you cant afford to waste a single dollar on marketing because there aren't huge budgets available for it.

Here are some ways that worked for me without spending cash.

• Ask your best customers for a referral and reward them with products.

• Automate social media posts to go out at the exact time they might be thinking of your products.

• Build a relationship with the media by telling them about interesting things you're doing.

• Reach out to tiny niche groups and ask them how you can help. ie a specific morning cycling group, new mums, university professors gathering, book club. Host their next event.

• Turn feedback into Google reviews

• Get active on social media and start to positively comment on other people's accounts with relevant comments. Their followers will see it.

If you do want to spend money - do something you can track like a referral program or geo-targeted social media campaign or simply boost a post that is performing well.

A referral program will likely cost you free products instead of cash and boosting a social media post is great for low budgets.

Step 3: Increase how much customers spend per transaction.

Okay, so you've got regular clients.

You've increased the quality of your products and services.

You've put your pricing up.

You've encouraged people to come and buy your products through outreach marketing.

These are huge things!!

Now, you need to maximise the spend per transaction.

Don't waste your enormous effort in attracting a customer and turning them into a regular client, only to miss the opportunity to offer them more and complete the experience.

They're literally standing there about to buy. What else can you offer them?

To do this well you need to know your customers. You want to avoid offering products that don't suit your core business.

Look for tiny things that represent value to your clients and don't overdo it. Less is more here. A huge pile of something special one day and gone the next is better than 2-3 of lots of items.

Make a statement. Make it fresh, impulsive, and special.

Summary: Key Points

Business is highly competitive but pricing plays a tiny role in why people buy from you.

The sooner you put your prices up, the sooner you will have more cash to drive better experiences and hire talented people. 

Step 1: Create excellent products as a baseline.

Step 2: Deliver remarkable experiences people will talk about.

Step 3: Increase your prices.

Step 4: Negotiate with suppliers.

Step 5: Do low-budget marketing consistently before it's too late.

Step 6: Reach out to minority groups and find a way to help them.

Step 7: Build complete in-store experiences by offering irresistible upsells

That's all for how to grow a business. 

Thank you for reading.

I hope this helps you!