How to Improve Your Small Business’s Profitability During Economic Difficulties

When economic conditions aren’t great, it’s always difficult for businesses to maintain profitability. It’s particularly hard, however, for small businesses. Large corporations can stay profitable by applying pressure to external partners such as suppliers and shippers. A small business, however, doesn’t have the same leverage that a larger company does. You’re probably not going to get a sweetheart deal from a shipping company, for instance, if you aren’t providing that company with many millions of dollars in revenue.

The fact that you can’t just strongarm your way to higher profitability during an economic downturn, however, doesn’t mean that it’s impossible – it just means that you need to be a little more creative. Here’s the good news: Finding ways to shave costs while still providing a great experience to your customers will pay great dividends in the long run because it’ll ensure that you’ll be ready to take full advantage of any opportunities that may arise when economic conditions improve. 

To improve the profitability of your small business, you’ll need to increase your revenue while reducing the expenses that you pay in the process of earning that revenue. Here’s how to do it.

Find a Better Product Supplier

If you operate a resale business, chances are that you can get your products from many different sources. There isn’t just one vape wholesaler, for instance – there are many wholesalers located all over the world. The same is true of almost any industry, so you don’t need to stick with a supplier that’s charging you more than it should.

In the world of retail, there’s often a good amount of wiggle room when it comes to wholesale prices – so you shouldn’t be afraid to haggle with a wholesaler if you’re having trouble maintaining profitability. One very effective way of doing that is by first finding another wholesaler willing to quote you a lower price than what you’re currently paying. Bring that quote to your current supplier and ask them to beat it. If they’re willing to beat the quote, you’ll enjoy a much lower price than what you’re currently paying – and if they won’t beat the quote, you can simply change suppliers.

Use Your Marketing Budget More Intelligently

During difficult economic times, taking a close look at your marketing budget is one of the most effective things that you can do to improve your small business’s profitability. When you audit your advertising expenditures, you’ll probably find that you’re spending far too much on social media and search engine marketing. Social media users are increasingly blind to advertising, and bidding on keywords on Google Ads is often so expensive that you’ll spend more to win a new customer than what you’ll actually earn from that person. You should consider greatly reducing your social media spending and limiting your bidding on Google to the most profitable keywords.

The problem with social media and search engine advertising is that they only provide returns in the moment; as soon as you stop spending, the revenue disappears. During difficult economic times, you should focus your marketing efforts on evergreen projects that will continue generating revenue indefinitely. It’s worth the money to invest in high-quality content for your website because website content is yours forever. Off-site placements are also valuable because links from external websites can help to improve your site’s search engine rankings. Organic traffic is always the most profitable traffic because it’s free.

Find Ways to Increase Customer Engagement and Return Business

When your business earns a new customer through social media or search engine marketing, you’re paying to earn that customer. In some cases, you may even lose money on the first sale. If that person returns to your website in the future and buys again, though, that’s pure profit aside from your regular product costs and order fulfillment expenses. Therefore, one of your primary goals should always be to keep your existing customers engaged with your company.

One of the best ways to keep your company at the top of customers’ minds is with direct email marketing. As a consumer, it’s likely that you’re on several companies’ email marketing lists. What makes you want to read email newsletters and click promotional links? You should strive to replicate those qualities with your own email campaigns. If your newsletters provide value, you should have no trouble generating engagement.

Don’t forget that having a great customer loyalty program is also an excellent way to maintain customer engagement. If your loyalty program involves simply giving reward points to customers and letting them exchange those points for discounts, though, it’s probably not having the intended effect. A good loyalty program should be fun; your customers should be checking their point balances every time they log in to your site. Think about the loyalty programs that engage you as a consumer and try to copy the successful qualities of those programs.

Encourage Customers to Spend More When Ordering

One of the best ways to increase your small business’s profitability is by encouraging customers to spend more when they buy from you. The cost of shipping a single large order is often less than what you’ll spend to ship a few small orders. 

Have you ever evaluated a successful e-commerce website like Amazon to better understand the qualities that make the site successful? You’ll often find that nearly every page on the site is geared toward getting people to spend as much money as possible by offering upsell and cross-sell recommendations every step of the way. If your site uses a high-end e-commerce content management system, your CMS may have the ability to make intelligent product recommendations already. If you’re using another CMS such as WordPress, you can probably add that capability via a plugin.

Another way to get customers to spend more money when they buy from you is by tempting them with product bundles. If you sell many different types of products within a single category, a product sampler always has a good chance to be successful. You might also consider creating an attractively priced bundle that pairs a popular product with a few products that aren’t selling quite so quickly. It’s a great way to clear out unwanted stock.