4 Ways To Increase Revenue
This may come as a surprise, but if you want your business to make more money, there are only 4 ways to increase revenue: increasing the number of customers, increasing average transaction size, increasing the frequency of transactions per customer, and raising your prices.
Understanding the 4 ways in which to increase your revenue can be helpful in deciding how and where to focus your efforts in building your business. So let's jump into it!
INCREASE THE NUMBER OF YOUR CUSTOMERS
This one is fairly straightforward: more customers buying your services will bring in more money. But there are different ways to go about it. The most cost-effective way to increase your number of customers is by getting referrals from the ones you already have a relationship with. When compared to new customers from other sources, referrals are usually more ready-to-buy and easier to convert to paying customers. People will usually trust what others recommend more than other forms of marketing. Implementing a consistent, automatic referral system in your practice can pay off big time!
INCREASE THE AVERAGE TRANSACTION SIZE
Another way to increase your revenue is to get your customers to purchase more. This is typically done through a process called upselling. The more items the customer purchases, the more revenue you collect.
First, it’s important to identify what your customers are looking for. What problem do they need you to solve? Often, they aren’t aware of what solutions or products you have that could solve their problem. So you need to first educate your customers about your add-on or additional services and how it can help them. This can be done at the point of purchase, at checkout, or post-sale in a recommended products email.
INCREASE THE FREQUENCY OF TRANSACTIONS PER CUSTOMER
In this case, you want to encourage your customers to purchase from you more often. If your average customer comes in once a month, convincing them to come in once a week will increase your revenue.
This may be done by offering incentives and subscription packages, and by educating them on additional products and services you offer. You need to give them a reason to buy more from you!
RAISE YOUR PRICES
The fourth way to increase your revenue is by increasing your prices. This one requires careful consideration of the cost/benefit analysis each of your customers goes through before buying. An increase in price may cause some customers to find an alternative or to go without, reducing the number of customers or the frequency of their transactions. If your pricing is already appropriately set, an alternative to raising prices can be increasing your capacity to serve your customers by offering more hours or more staff to increase your volume.
WHICH METHOD TO FOCUS ON?
Choosing which method in which to grow your revenue will depend on a range of factors. To start, try answering these questions:
Can you cope with losing some clients or do you need more to stay afloat?
What is the size of your total addressable market?
Do you have efficient customer service operations?
Can you afford to spend on marketing?
Are you in a high-growth industry?
Do you have a product or service that is suitable for repeat buying?
Do you have insight into competitors' prices?
This will help you understand which method will be most effective for your business. For example, if you have a large marketing budget and a great customer service team then focusing on increasing the number of your customers could work well. If you are in a slow-growing industry with a limited pool of clients then focusing on increasing the frequency and size of each current customer sale could work better.
Realistically, most businesses use a combination of all four methods at various stages in their business. The key is knowing when and how to use each one.
If you’d like further assistance, we offer coaching sessions. You can book in for a free and zero commitment consultation with us.