Five Strategies to Make More Money

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Here are five key strategies to increase your business, and your profit. It’s best to build up by 10 percent using these methods, but the slow and steady approach will be worth the results.

1. Increase Your Leads

Grow your number of prospective customers. By interacting with more people, you’ll increase your chances of turning them into customers. Here’s a few tactics to increase leads and make more people aware of your business:

• Document your most successful promotional tactics. Repeat those successes by putting more budget and effort into those marketing strategies.
• Profile your target audience and contact them directly.
• Attend industry events and conferences to meet potential customers.
• Redesign your website to increase opportunities outside the Islands.
• Develop new distribution channels. Think about using agents, licensing your goods or utilizing new distributors.
• Ask current clients to give you referrals.
• Use search engine marketing and buy AdWords.
• Run webinars or speak at local events.

2. Convert Leads Into Customers

Once you have more leads, increase your conversion rate by making them your customers. Even converting 10 percent more into customers will generate significant sales.

Measure your current conversion rate. For example, calculate the number of unique users visiting your website divided by the number of your online sales and then consider the following:

• Organize local staff training on selling techniques and closing methods.
• Provide your staff with incentives or bonuses for higher conversion rates.
• Run demonstrations for potential customers to see what you can offer them, how they can benefit and then sign them up.
• Ask people to connect by creating calls to action or incentives through promotional materials, your website, blogs, social media and free trial offers.
• Create whitepapers or research content to encourage people to register or download content for you to then follow up and close the sale.

3. Increase the Number of Items You Sell

If you can entice your customers to buy another item, hour or extra service from your business, your sales—and your profits—will increase. On-selling is a classic tactic to improve your profit. They include:

• Add impulse or lower-cost products at your checkout or offer a final sell when closing.
• Ask customers what else they would be interested in buying from you and then widen your product range to accommodate their needs.
• Bundle your products together.
• Offer complementary services.
• Research your competitors to find new product or service opportunities.
• If you sell products, add a provided service; if you provide services, add products to sell.

4. Increase Your Average Sale

If you can increase the average value of each sale, you’ll directly improve your profit. Here’s what you can try:

• List all your highest margin products and services. Check that they are profiled on your website, that they have the most promotional budget allocated to selling, and that they are the first products to be sold.
• Ensure all employees know to sell those products with the highest average sale price, and that there are incentives when they sell.
• Increase prices. Even small improvements, such as one to five percent, will show direct profit results.
• Introduce new premium products or services that have a higher value.

5. Increase Net Profit Percentage

Net profit can be improved by looking carefully at your gross and net margins. To increase net profit, try these tactics:

• Review all of your main suppliers and determine if you can swap any for lower-cost providers. Ensure any new supplier can match the quality and service you expect..
• Assess if there’s any parts of your business that can be sub-contracted out to lower-cost suppliers, or can be imported from more affordable producing countries. Make certain this tactic won’t impact what your customers expect. (For example, Hawaii-made versus imported).
• Identify your top five overhead costs to explore savings. Overheads such as insurance, office supplies, internet, subscriptions and communications often reduce in price year by year. Make sure you’re getting these reductions.
• Trim employee costs, if possible. Review job descriptions to find any overlap; you may be able to get by with fewer people on the payroll.

Summary

There are several simple, practical steps you can implement to improve your business’ profitability. Review these five strategies to increase your profits at least once a year. Repeat any strategy you find to be successful.

Next Steps

• Contact one of our friendly American Savings Bank Business Relationship Managers to see how we can help your Hawaii business grow.
• Meet with your employees, accountant and any other advisors to brainstorm additional tactics to increase profits.
• Ask your employees to contribute ideas to sell more and spend less.
• Monitor your main competitors to see what they are doing to increase sales, reduce costs and improve profits.
• Keep up to date with industry trends and look to adopt any new ideas or technologies that will lower your costs and improve your profit margin.

Find New Customers

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Find out the main sources of local help and advice, including  incentives and initiatives to encourage small business development.

It’s always beneficial to seek new customers. When new competitors enter the market and try to steal market share or old customers no longer need your business, it’s important to draw upon a fresh customer base. Here are five strategies to win clients. 

1. Look for New Customers in Your Existing Market

Chances are, there are several new customers in your existing market, they’re just hidden. Profile the best customers you have now. What do they look like? Where they are located? What do services or products do they utilize? Also include if they have any buying cycles, whether they attend conferences and what process they followed to become your customer.

Next, list how your best customers prefer to be contacted, and what worked when you originally marketed your business to them. Using the profiles of these ideal customers, find more that match. Set a marketing budget and develop a shortlist of targets that have potential for your business.

Don’t forget to ask for referrals. Your customers are likely to know other people just like them who could benefit from your products and services. Many customers are willing to refer your business if you ask.

2. Look for New Distribution Channels

To seek new ways to expand your customer base, identify other ways you could sell your products and services. Here are some strategies:

• Expand beyond Hawaii into different geographical locations by opening new locations, outlets, a franchise or a joint venture with other businesses.
• Go up or down the supply chain. If you’re a wholesaler, add a retail outlet—going up—or start importing direct—going down.
• Go online. You’ll be able to create a new avenue for your customers and widen your audience and therefore potential customers.
• Join contracting bids or open tendering opportunities in different markets.
• Consider any competitors or complementary businesses looking to exit. You might be able to buy them out to extend your reach and customer base.
• License what you do to similar businesses in other markets or countries. You own the intellectual property and they pay you a royalty.

3. Find New Markets

Define your market area or region, such as Hawaii or the Pacific, and then using local statistics or your industry knowledge, look for other areas, such as on the Mainland or overseas in Asia, to expand.

• Consider exporting: Overseas markets offer opportunities to expand your business. Conduct on-the-ground research in the countries you’re considering. Make sure to find out what regulations, tariffs and business risks are present in your new target market.
• Explore new market models: If you sell to consumers, consider if you can sell to businesses as well. Similarly, if you sell to businesses, find out if there is a way to sell to individuals.
• Look at nontraditional markets: The government or education sectors have opportunities worth exploring.
• Review your online strategy: While the internet offers a potential worldwide market, identify what’s practical for you to target. Otherwise your marketing efforts will be ineffective because your message is off-market or spread too thin.
• Focus on Selling

Every local small business owner should be placing emphasis and budget into selling strategies. It may sound obvious, but if you don’t sell anything, you’re out of business fast.  Assess your tactics and improve your sales success rate by:

• Host workshops, webinars or events to talk with customers directly and close the sale.
• Call or visit existing and potential customers at their business to direct sell.
• Offer discounted products or services to get new customers, and then up-sell and on-sell once they have signed up.
• Attend industry events and trade shows.
• Create content for new customers to download in exchange for their email addresses, and then add them into your email marketing campaign.
• Develop a sales plan, train and encourage everyone in your business to be a sales person.
• Using direct marketing software or engaging third party companies to send you qualified leads.

5. Partner with Other Businesses

• Form marketing partnerships: Jointly promote with another business. It’s even better if you can get in front of their customer base. Working together gives you instant credibility to their clients.
• Constantly network: Attend events, conferences or exhibitions your customers attend. Invest in any speaking opportunities to enhance your profile.

Summary

Finding new customers is one of the most common growing pains for small business owners. Over time it’ll get easier, because you and your staff will know what sales and marketing methods work best for your business. It’s important to actively market to new customers on an ongoing basis to ensure your business never runs short of buyers.

Next steps

• Contact one of our friendly American Savings Bank Business Relationship Managers to see how we can help your Hawaii business grow.
• Generate a list of practical tactics to add new customers that are relevant to your business and industry.
• Ask new customers how they found your business so you can focus on marketing activities that yield results.
• Make a list of non-competing businesses serving the same customers and approach each one about forming a strategic alliance.
• Invest in sales training for you or your sales team to improve selling skills.

Check that your business idea will work

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Although the only real way to find out if your business idea will work is to actually start your business, there are a number of things you can do to help research your business idea before you take the leap.

Working through this process methodically will give you a better sense of your businesses chance of success .

Reality Check 1

Have a key competitive advantage

Your business ideally needs to stand out from the competition. If your business has a unique selling point (USP) or competitive advantage, it will give customers a reason to go to you, rather than anyone else. Businesses which do not have a clear and strong USP, often have to resort to competing on price. This typically means lower profit margins.

Consider basing your competitive advantage on something the customer values. For example:

• First to the market and no one else sells what you do.
• Being the most reliable with the best guarantee.
• Having exclusive products or a contract so you are the only supplier.
• You have the best quality or longest warranty.
• Having a cost advantage so you can be the cheapest yet still make a profit.
• Being the healthiest or most sustainable.
• Knowing more than anyone else and being an expert
• Being made in Hawaii.
• Organic or use recycled materials.

Reality Check 2

Research your target market

It makes sense to ask the people you’re likely to be selling to, what they think of your business idea. Try and find out:

• Whether people actually want what you’re selling.
• Which people or businesses are most likely to buy.
• Which group of customers are likely to be the most profitable.
• What prices you could charge for your products or services.
• How often people will buy.
• The benefits that people want to receive when they buy your type of product.
• What needs people have which are currently not being met by any other businesses.
• The best ways to market to potential customers.
• Where people currently buy from and why they choose to support those businesses.

Much of this information can also be used to determine whether there will be sufficient demand for your business’s products and services for your business idea to work. It can also be used to figure out how you can modify your original idea so it will be viable, perhaps by identifying ‘gaps’ in the market.

Test the market

Trial marketing can be one of the most reliable ways to test your market potential. If you are introducing a new product or service, you could:

• Set up the business part-time while still working.
• Test the response by selling at trade fairs, weekend markets or short-term contracts, depending on the type of business you’re running.
• Launch a limited marketing campaign in a selected town or area.

Reality Check 3

Make sure your business model will work

It’s relatively simple to determine whether you can sell enough to make a profit, but can you physically make enough?

For example selling a product which takes four hours to build, means you have a capacity of two a day (around ten a week or five hundred a year). Is this enough to make a profit from the price you’re selling them for? If you’re a retailer then calculate how many people you need per day spending the average amount for a customer in your type of business. Is the business viable?

Conduct a break-even analysis to show the minimum amount of sales that your business needs to make in order to cover all of your costs. Then work it out again, this time with your profit margin added in. If you can make at least this amount of sales, the idea may be financially feasible (assuming you can still get customers of course).

Reality Check 4

Do you have the money

Calculate how much money you need, and how much money you have. If there is a gap then you’ll need to cover this amount somehow. It's common for some business owners to underestimate the actual amount of money needed to start up a new business venture.

Step 1

Add up all the purchases you’ll have to make to get your business up and running. Some of these costs could include:

• Vehicles, plant equipment and machinery.
• Office equipment, computers, scanners, desks.
• Initial inventory or raw materials.
• Fees for licenses or permits.
• Any staff you need in advance before the doors open.
• Your own salary (if you intend to take one).
• Internet, online, website build.
• Product or service development.

Step 2

Once you’ve determined all your set-up costs calculate your ‘working capital’, which is how much you’ll think you need to cover all your running costs until you start to make a profit.

Examples of these on-going costs include:

• Rent, power, internet.
• Accounting fees, insurance, bank fees.
• Salaries or wages, any sub-contractor costs.
• Online subscription fees, communications.
• Anything that is a regular cost regardless of sales.

For example if these costs totalled $20,000 a month, and you’ll think you need at least 6 months until the business can pay its own way, then you’d need $120,000 in working capital.

Step 3

Add the set-up costs to your working capital costs to get a final start-up estimate.

Do you have enough money saved, borrowed or accessed from somewhere to cover this amount?

Summary

Your business is much more likely to succeed if you can pass these initial four reality checks. Sure, there are still hurdles to cross, such as accurate pricing, finding a location, being able to find customers and building a sustainable revenue stream.

Next steps

• Allow some time after you have collected all your research. Ask yourself if you want to proceed.
• Talk to a business advisor or another small business owner about your idea, and collect as much feedback as you can. Though the final decision is yours.
• If your information points to a viable business, you feel confident in your entrepreneurial abilities, and you want to move ahead, then your next step is to write up a proper business plan.

Decide how much money you need to start

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Many new businesses need start-up capital. Find out the main options of raising funding for your new business.

Before you start a business, it’s best to know how much money it will cost and make sure you have access to sufficient capital. It’s important to be realistic with all of your figures, and to estimate costs and revenue as accurately as possible so you can calculate how much you need.

How much money do you need?

1. Set-up costs (money you’ll need before you start operating).
2. Initial working capital (money you’ll need to run the business until you start making a profit).

Set-up costs

• A web designer would have low costs: a computer, software, possibly liability insurance and any legal costs setting up a company.
• A builder would have higher costs: tools, vehicle, and equipment for any specialized work.
• A restaurant’s set-up costs may include kitchen equipment, seating and initial food ingredients.

• Rent deposits and any building renovations before you open for business.
• Licenses and permits.
• Employee recruitment and training.
• Initial inventory or raw materials.
• Signage, marketing materials, web site development and advertising.

Working capital

Once they open, many businesses don’t have enough sales revenue to cover overhead costs. Time is needed to start and generate customers to cover all the overhead (and make a profit). Until this happens you’ll ideally have spare cash in the bank (also called “working capital”), to pay for monthly expenses until sales can cover all your monthly costs.

Work this out:

• Begin by estimating your monthly costs (wages, utilities, internet, advertising, rent – everything). This will give you a monthly amount you need as a minimum to stay in business.
• Transfer these totals to a cash-flow template.
• Now add your sales estimates for the first six months (being realistic and remember some businesses don’t have any sales initially). Each month you’ll see how much working capital you are short.
• If you have customers on credit or account, they rarely pay on time. Factor into your calculations that you may need to wait 30, 60 or 90 days for payment.

Cost out every item and get quotes

You can get accurate figures for set-up costs and working capital expenses by rolling up your sleeves and carefully researching all costs.

• Get written quotes from suppliers for each service or product you need to run your business. Ask them to guarantee the quoted price for at least 90 days; that way, you won’t have any surprises when you go to start-up your business.
• If you are leasing or buying premises and must pay for utilities, contact the utility company to find out the monthly cost. Ask about any anticipated rate changes.
• Research online or contact vendors directly to identify costs for office supplies, internet access, telephone charges, furniture, alarm systems, data storage and office cleaning.
• Include any transportation or travel costs you may incur to get your business going.

Contingency budget

It can be difficult to foresee all the costs you will incur to get your business up and running. Inevitably, there will be some costs that you didn’t expect, or purchases that simply end up costing more money than your earlier estimate. Costs can also change if there is a substantial period between when you priced something out and when you buy it – an insurance rate obtained last year may be much higher this year because of changes in the marketplace.

You can accommodate changes to your start-up budget by including a contingency budget. Consider adding ten to twenty percent or more to your start-up budget for unexpected set-up expenses or changes to your working capital needs.

Start-up budget formula

Use this formula to safely calculate the amount of money you’ll need to start your business:

• Set-up costs + working capital costs (monthly costs x the number of months you’ll be short) + a contingency budget.
• Example: Start-up costs $200,000 + working capital $120,000 ($20,000/month x 6 months) = $320,000 to start and cover costs for 6 months. Add a 10% contingency to be safe which totals $352,000.

Take this total and calculate where this will come from:

• Personal savings.
• Bank finance.
• Investors.
• Government grants.
• Loan from friends or family.

Summary

Work out exactly how much you think you’ll need to start, with a realistic contingency to cover any cost blow outs. Remember to make a plan to pay for your personal living expenses while your business gets off the ground because if it won’t be able to pay you a salary initially. Figure out your household expenses to know exactly how much you’ll need each month.

You may have all the cash you need for starting a business. If not, then carefully consider all the options available to secure start-up funds.

Next steps

• Contact one of our friendly Business Relationship Managers to see how we can help your business.
• Conduct your market research carefully to determine how much money your customers will be willing to pay you. This helps to accurately forecast sales revenue.
• Explore government grants for small business owners in Hawaii.
• Contact the Small Business Administration Hawaii District Office for help to get your business up and running.

Building Competitive Advantage

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Identifying your competitive advantage

A competitive advantage is what your business does better than others. The smarter you can be about developing and promoting your competitive advantage, the better placed your business will be to succeed. The most common competitive advantages are:

• Low pricing: You’re able to supply the lowest-cost product.
• Specialization: You service a specific niche market better than other businesses.  
• Differentiation: You have the same product or service as others, but you deliver it a different way.

However there are a number of other ways to build a viable competitive advantage, especially when everyone in the same industry has similar prices, products and services.

Eight ways to build

1. Promote your staff

One of your best competitive advantages is your staff. The advantage of having friendly, knowledgeable, proactive staff shouldn’t be underestimated. The key is to make sure your staff are motivated, trained and successful. Help your staff by:

• Establishing clear performance standards.
• Starting incentive or bonus programs to reward staff for their successes.
• Encouraging employees to develop their product or service knowledge and paying for training.
• Learning what other great companies do and adopt any ideas that are relevant to your business.

2. Use your location

Be where your customers are located. For example, if you are a retailer and you don’t have a location that attracts foot traffic, you’ll be short of customers. You should also consider:

• Retail and customer location trends and whether you need to, relocate.
• Marketing your business with business-to-business accounts, free pick-up and delivery, drop-off points or wholesaling through other businesses with better locations.
• Encouraging customer interaction, such as via online communities, attending conferences or exhibiting at events.

3. Offer unique or exclusive products

You have an advantage if you can source products or deliver services that the competition cannot. If you’re competing against larger or similar businesses, establish a reputation for unique products. For example:

• Seek exclusive agreements with suppliers.
• Look overseas to find products or a brand that other businesses don’t carry.
• Find a location, contract, service, agreement or tender that only your business can deliver.

4. Have a great website

A website that is more attractive and easy to navigate than your competitors can be a distinct advantage. Can you create a better, easier online shopping experience? Here are things to consider:

• Focus on great design.
• Be aware of how search engines rank sites and be on the top.
• Use content marketing, such as guides, whitepapers or giveaways to build expertise and to have potential customers make contact.
• Use new technologies and marketing automation to gather, nurture and close any new leads.

5. Become a star

Your own image can be a competitive advantage. No one else has quite your mix of skills, and you can build a character owner image by having your name on as many materials as possible, including:

• Having your name or face associated with the business.
• Speaking at conferences as an expert.
• Becoming prominent in your community by volunteering on local boards.
• Becoming an authority in your field and a spokesperson for your industry.

6. Get to know your suppliers

Being on good terms with your suppliers and their sales representatives is an often-overlooked competitive advantage. You might find that they do most of the market research, develop new products, conduct customer analysis and provide nation-wide branding and advertising that enhances your credibility. A good relationship could provide:

• Better service and support. You might get promotional material, displays and signs or training for your staff in advance of everyone else.
• Better supply and faster delivery.
• Better return policy and customer support.

7. Form strategic alliances and joint ventures

One of the best ways to compete against other businesses is to form alliances and joint ventures. For example, by banding together with other businesses in your industry, you can often gain better group discounts from suppliers than you would if you ordered on your own. Joint venture marketing is another way of sharing advertising costs. By joining together with businesses from the same location, or same industry group you can help increase demand for the industry as a whole.

8. Deliver speed

People increasingly want quick service, so the faster you can deliver your product or service the better. Hold regular staff meetings on how to streamline your business processes and fulfill or exceed customer requirements without sacrificing quality of delivery.

Next steps

• Contact one of our Business Relationship Managers to see how we can help your business grow.
• Find out what your business does well.
• List your key competitors and outline what specifically you’ll do to challenge them.
• Always look for new competitive advantages. Go to conferences, research online, and look at what other industries are doing.

BUSINESS LOAN CALCULATOR

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If you need to borrow money, this calculator will estimate the cost of repayments for a business loan.

Note: Results are based solely on the information you have provided; product may not be available for all terms entered. These calculations are provided for illustrative purposes only and do not reflect any additional costs. This is not a credit decision or a commitment to lend. Please contact an experienced loan consultant for more accurate and detailed information.

BREAKEVEN CALCULATOR

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Calculating the breakeven point of your products is an important part of testing the feasibility of your business. Use this calculator to experiment with pricing, costs and time to find a combination that gives you the most viable solution.

If you know your overhead and the cost of production, you'll be able to work out how many products or services you need to sell to breakeven.