Greater Profits

I need help making my company more profitable.

There are only four ways to grow your business. But surprisingly many companies try to increase their profitability by lowering their margins in the hope that greater volume compensates. Did you know that more companies go out of business by charging too little than by charging too much?

The four ways to grow your business are:

1. Multiply the number of preferential customers
   
2. Increase individual sales transactions
   
3. Increase the profit margin per transaction
   
4. Increase the process effectiveness in your business i.e. reduce the cost of transactions and processes

Hobb & Company specializes in helping clients become more profitable. Our focus is riveted to that one goal. By focusing on the four ways to grow a business we strategically map out a plan tailor designed to meet your specific needs.

Following are the four ways to make your company more profitable. But what is better is for you to discuss your business with us. We’ll show you how to increase your profitability the Hobb & Company way.

Four and only four ways to grow your business

If you're skeptical about whether there really are just four ways (obviously with multitudes of strategies under each) think of a strategy to grow your business - any strategy - and you'll find it falls under one of these four areas.

Conversely, think about a strategy like 'cutting costs' - realistically that won't grow your business unless you use the money you save to promote your business. It may let you control your business better and return greater profits, but it won't help you to actually grow your business.

1. Increase the number of customers (of the type you want)

If you're like most business owners your primary focus will be on the first way to grow your business - winning new customers. You may have often thought 'I need more leads', 'More inquiries', 'Get the phone ringing', 'More people walking through the door' - so you invest heavily in advertising, for instance. Advertising and marketing is good. It promotes your name, can give your operation a unique brand as well as logging your name in the minds of your target audience. However, there are other ways to win increased sales that don't cost nearly as much. Usually those strategies go unnoticed and unapplied. We'd like to share them with you.

It costs up to 6 times more to win a new customer than it does to have an existing client increase their work with you. Focusing on this way to grow your business is often far more expensive and the least leveraged. That directly affects your profit potential.

The team at Hobb & Company will work with you to find other leveraged ways of winning new customers as well as showing you how to improve your current marketing and advertising strategy. We'll make sure you're attracting the right type of customer - someone who's 'qualified' to buy from you. We'll also work with you on the three remaining ways to grow your business so you're maximizing all of your opportunities rather than focusing on just one way to grow.

2. Increase the transaction frequency

Increasing the 'transaction frequency' - or the number of times someone deals with you is an important step to increasing your profitability. In fact, some scholars say this second way is the most important of all. It's a fancy definition of loyalty, or customer retention, which in and of itself is closely related to value.

Frederick Reichheld has done extensive work on the subject of customer retention. It was most recently captured in his brilliant book, 'The Loyalty Effect'. Reichheld discovered that a 5% increase in retention (of the right customers) can produce as much as a 125% increase in profit. He didn't say a $5,000 or $50,000 investment in marketing can produce a change of 125% in profits. He said JUST a 5% change in RETENTION of the right customers.

Staggering isn't it? And, of course, you affect loyalty by delivering value and by nurturing your customers. The team at Hobb & Company knows how to develop your customer targeting and retention strategies.

3. Increase the transaction value or 'average sale'

This is a 'Blinding Flash of the Obvious' or 'BFO'! However few businesses realize its importance (in fact, they do the exact opposite).

There are two fundamental ways to increase the average sale. First, by 'cross selling' or 'up-selling', both mean you encourage the customer to buy more. The team at Hobb & Company can teach you how do to this in a systematic fashion so it happens every time and adds value to the customer.

The second way to increase the average sale is to raise your prices. Often suggesting raising prices to the average business person sounds crazy. However, your team from Hobb & Company will guide you through what's called "The Margin Chart". It shows the direct relationship between the four key variables in your business - price, volume, fixed costs and variable costs. You'll be amazed at the possibilities.

4. Increase the effectiveness of each process in your business

The fourth way to grow your business is more of an all-encompassing strategy than the other three ways. Increasing the effectiveness of the way you do business is central to everything. But few people work at it.

When you think about it, a business is nothing more than a group of people carrying out a variety of processes - the quality of the processes defines and determines the quality of the outcomes. So going back to the earlier example of a business owner needing 'more leads', we might discover that in fact, the business doesn't need any more leads, but rather to convert more of the ones they are already receiving. That's a sales 'process' that needs improving. The fact is that most people don't see their businesses as a series of processes. But that's exactly what they are. So we look at exactly what results your current processes are generating. We then see how we can improve on those.