Every business wants to know how to maximize profits, but sometimes earning more by selling more isn’t a viable strategy. Market conditions can turn lead generation efforts cold, perhaps your business isn’t positioned to scale right now, or maybe you’ve just hit a wall with sales and need to find revenue elsewhere. 

Luckily, there are ways to boost revenue and profit without solely relying on increasing sales.

In this article, we’re going to cover:

• Practical cost reduction strategies
• How to increase revenue without selling more

How to Increase Revenue Without Selling More

In addition to cost reduction and control, businesses can optimize existing strategies to increase revenues and profit margins. Here’s how.

1) Retain customers by providing stellar customer service

What’s the difference between earning a new client and not losing an existing one?

Nothing.

Clients could leave for any number of reasons. However, not all of them have to do with price or profit. There’s a famous study from the 90s that perfectly illustrates this.

Researchers were curious about how hospitals could prevent medical malpractice claims. Making fewer mistakes is the obvious answer, but they’re inevitable. The field is known as the “practice” of medicine after all.

They separated doctors into two groups, claims vs no claims, and collected all the data they could about them. What they found was surprising. A leading predictor of malpractice claims was average patient consultation time. A difference of just three minutes divided the two groups.

It shows that people are more forgiving if they feel valued and cared for. Face-to-face time helped. 

So, be the business that goes the extra mile. Send Christmas cards. Proactively communicate and solicit feedback. Listen actively when clients explain their problems. Nobody wants to read a wall of text, so respond to emails promptly and succinctly.

And above all others, never use an automated phone tree.

2) Embrace strategic partnerships

If you don’t want to sell more, have someone else sell more.

Collaborating with strategic partners can be a game-changer for maximizing profitability. By forging alliances with complementary businesses, companies can tap into new markets, leverage shared resources, and expand their customer base.

Here are a few classic pairings to kick-start your brainstorming:

• Caterers and event planners
• Content writers and web designers
• Accountants, financial planners, and law firms

Consider kicking off a new relationship by sending them the first referral. The law of reciprocity might surprise you.

3) Reevaluate pricing strategies

Instead of selling more, how about better?

Businesses don’t have to put more effort into building a pipeline to adjust their pricing strategy. A small tweak could lead to a sizable jump in sales with little additional effort.

For example, a business that highlights the value of its products, rather than the price point, has access to more valuable market segments. Selling based on cost is a race to the bottom, and customers motivated by price point aren’t often the best. Conversely, customers that purchase based on value are willing to pay a premium for quality products and services.

Bundling is another method that could improve revenue without increasing sales. Putting multiple services together at a lower combined price than their a-la-carte prices can motivate buyers to spend more than they otherwise would have. 

One last idea is to implement psychological pricing. You probably know that $19.99 and $20.00 are distinct psychologically, but there are plenty more tactics to try. For instance, Kohl’s is the master of implementing discounts to create a perception of value. They raise the prices just to discount them afterward. Even though consumers know this is the strategy, it still works.

How to Maximize Profit by Cutting Costs

Increasing revenue is usually the more appealing way to maximize profit, but your bottom line is indifferent. Higher revenue or lower costs translate to profit in equal measure.

Start Here: Conduct a Comprehensive Cost Analysis

It’s impossible to know where to cut without a clear picture of your business financials. 

If you don’t already, track exactly where your costs are coming from on a month-to-month basis. Popular bookkeeping software, such as Quickbooks or Wave, will help. They integrate with your bank accounts and automatically pull incoming or outgoing expenses. Setting that up and looking at retroactive reports should be a breeze.

Everything from operational costs to overhead, payroll, and marketing is on the table. You’re looking for the largest pieces that, if trimmed, would contribute the most to business savings. It wouldn’t do any good to trim budgets for marginal expenses, like office supplies when more robust spending categories might exist. 

Don’t just look for money, either. Your time as a business owner is valuable. This analysis might reveal that you’re dedicating too much time to low ROI activity.

Cost Benchmarks by Category

Once you have quality expense information available, it’s time to evaluate what might be abnormal. These will vary from industry to industry, but here are some spending benchmarks to compare yourself to. Should you wildly overshoot these guidelines, it may be time to make some cuts.

What percent of revenue should be spent on payroll?

Somewhere between 15% and 30% of gross revenue is a good place to begin. 

Labor-heavy industries, such as hospitality, HVAC, or consulting, will have higher ratios. Capital-intensive businesses, such as technology or manufacturing, will be lower.

What percent of revenue should be spent on marketing?

A Deloitte survey of 2000 companies found an average of ~10% of gross revenue. Healthcare, retail, and consulting were considerably higher than the average while transportation, energy, and education were lower.

What is a good return on marketing?

Once you have your marketing budget aligned with norms, it’s worth asking what a respectable return is.

Attributing specific results to campaigns can be difficult if you invest in multiple marketing channels. However, a good rule of thumb is that 5:1 is good, 10:1 is exceptional, and 2:1 is probably unprofitable.

What percent of revenue should be spent on overhead?

This is where business owners can get into trouble. They’ll let overhead costs balloon, take a smaller salary than they should, and convince themselves that their margins are healthy.

A general guideline is that overhead shouldn’t exceed 35% of revenues. 

Practical Cost Reduction Strategies

Now that you have a clear understanding of where your costs are coming from, let’s explore some practical strategies to help contain them.

1) Creatively negotiate with suppliers

Whether working with contractors or purchasing inventory from a wholesaler, there are ways to get the same quality product without paying quite as much.

If financing is the norm in your industry, suppliers may be open to a discount in exchange for cash upfront. Purchasing in bulk or committing to a service provider for the long term are other ways to generate a win-win for you and your supplier.

2) Refinance

The best time to do this was before the federal reserve began raising interest rates. However, that doesn’t mean there aren’t cost-saving opportunities to be found in refinancing. 

A consolidated creditor could save you time in administrative tasks, potentially bring a lower overall interest rate, and work with you on finding an affordable monthly payment and loan term.

If nothing else, a 0% APR credit card could buy you some breathing room while you ramp up revenues in other ways.

3) Maximize your tax deductions

You’ve earned every dollar your business makes, so don’t give it away at the end of the year because of suboptimal tax strategy or expense tracking. There are plenty of small business tax deductions that not everyone takes advantage of.

4) Seek guidance from and empower employees

Depending on your business, it may have been a while since you were directly involved in some of its activities. Seeking guidance from the people responsible for day-to-day spending can be a fruitful endeavor. At this point, they may know more about it than you do. 

Just be sure to frame the conversation proactively and positively. This could just as easily be misinterpreted as a scolding from the boss rather than a genuine request for input.

5) Embrace remote work

This topic can be controversial for some, but the simple logic is that no office space means less overhead. Many businesses are finding success with remote-only working environments and customers are more accustomed to it than ever. Why not you?

6) Consider outsourcing

Sometimes a business needs expertise, but not enough to justify hiring a full-timer.

It’s possible to reallocate existing resources and get the job done, but it may be more effective to tap an outside organization. Plus, you can tailor the outsourcing to only exactly the amount of help needed.

7) Utilize automation

AI is taking the business world by storm. Being an early adopter of new technology brings competitive advantages and potential cost savings.

AI software tools can streamline processes, reduce manual errors, and sometimes remove the necessity of an employee altogether. There are certainly learning curves to overcome but the benefits are worth it.

Cost Reduction: Trivium Point Can Help

Savvy business leaders can increase revenue without necessarily having to sell more and Trivium Point is ready to help. This is just one of the many ways we help business owners navigate the complexities of owning and running a lucrative business. Get in touch with us today to explore how Trivium Point Advisory can support you with your company’s financial needs.