Become a sold-out to save your business and retain your customers
There are a million reasons to raise prices right now. Inflation. Labor shortage. taxes. The ongoing impact of the pandemic. war Global supply chain issues.
At first glance, this may seem justified: if we don’t raise our prices, we won’t survive.
On closer inspection, there are reasons not to: you won’t survive if you lose your customers.
Rising prices may cause permanent damage to your relationship and your business in general. This opens the door for your retail buyers and customers to look elsewhere for the same products or question the need for your products all together. This is especially true if you are a small or medium supplier to one of the largest retailers in the world.
It’s a dilemma that almost every business leader faces today, with many feeling they have no choice but to grow or risk their entire business.
What if I told you it doesn’t have to be one or the other? What if you could not only save, but also improve your business without increasing costs for your customers?
You can ensure that major retail partners come back to you for more business, while reducing the number of sellers several times your size. You can maintain a high level of quality without passing on price increases. You can be stronger and better prepared to grow during times of inflation and economic downturn.
I know it’s possible because I’ve helped my own businesses through it, and helped other businesses navigate it, many times over the past twenty years. You can do the same.
This four-part series, “The P&L Survival Guide,” has a clear theme: control the controllable and get your business in shape. Obvious in theory; Difficult to practice. You can’t control inflation, epidemics, labor shortages, taxes, wars, or global supply chain issues. So what can you control?
For starters, you can control your income. This is the first important step in shaping your P&L. Here’s how.
Become a seller.
I don’t mean lowering your standards, predatory pricing or selling your soul. Instead, focus on increasing revenue through sales. The companies that will not only be best equipped to weather the next few years, but will also have the highest potential for exponential growth are the ones that sell.
It won’t be easy. A divestiture will likely require changes to your company culture and, potentially, your overall business model. This will require proactivity and personal accountability across the organization to discover and implement new and different revenue avenues.
Here are five ways to improve your revenue without raising prices:
Ship Open Orders in Full – The Easiest Way to Sell Expand Your Existing Inventory – Develop New Products for Existing Customers Generate New Business – Identify New Customers, Services and Revenue Streams Go Direct – Increase Margins and consumer engagement – Revise terms Do – Revise transportation costs, discounts and program terms
Ship all open orders. Recently, many companies are struggling to ship their orders on time and in full. If you run out of items from a purchase order, first focus on fixing the issues that caused you to ship late, ship late, or cancel the order. As a result, you almost certainly face chargebacks, penalties, and lost sales. Fix it. Fix inventory, meet pricing, and lose sales. Think about it – you already have the sale. Be sure to capture everything.
Expand existing inventory. Instead of increasing costs for existing customers, what if you could add more items to your store? What additional SKUs can you add to your inventory? Can you create a new bundle with existing and new SKUs, especially if some of the new items have better profit margins? Revenue growth can offset much, if not all, of the lost margin due to inherited cost increases from your old items. Think about ways to increase your footprint, value and influence with your customers.
Create new business. It’s a no-brainer and it’s where CEOs often start. They try to sell existing products to new customers. Yes, it can be a drama to create, but try to be more creative and open-minded about the possibilities. What if you went from selling products to selling services?
For example, one of our companies distributes locally produced products to wholesalers, major retailers and D2C channels. We leveraged our fulfillment capabilities within these existing businesses to partner with other businesses that were struggling to execute effectively or afford the costs of warehousing, fulfillment and distribution. This addition of sales force not only generated additional revenue, but also led to an entirely new business model, increasing our long-term growth opportunities.
Go straight. Direct-to-consumer sales are more tolerant of price fluctuations than large retailers. Consider expanding online where you can control prices and margins, but it’s imperative not to undermine your retail partners. If you can convert a small percentage of the market through D2C by delivering closer brand experiences and higher value, you improve your P&L without alienating your retail partners. You will also establish a direct connection and relationship with your consumers, giving you the best pulse of your value, product and brand community.
Please see terms. There are also indirect ways to increase income. Many businesses struggle to secure, control, and manage freight, which is not just a big expense, but a liability that can put your business with large customers at risk. Can you change your supplier contract to FOB collection from prepaid freight? Rebates, rebates, and allowances are also a smart place to look. Can you reduce or eliminate these programs while keeping the same bill value? Retailers will give up some margin, but they won’t have to raise prices on the shelf for consumers and risk losing retail sales. This is a nifty example, but one way to get creative with improving your business without fading as costs rise.
This strategy is just the beginning. There are countless opportunities to increase income, if you are willing to seek them out and innovate. You don’t have to resort to default cost increases, instead you can choose to take the initiative, adapt your business and expand your products and services.
These revenue-increasing strategies are just the beginning. If you’re willing to commit to everything and still feel like you have to pass on spending increases to major business partners, stick around. The next episode will develop another set of practical tips for improving the second key element of your P&L: reducing the cost of goods sold.
The opinions expressed here by Inc.com columnists are their own, not those of Inc.com
#soldout #save #business #retain #customers