There are basically 2 ways to drive profitability in any business.
• Increase income opportunities through policy strategies aimed at streamlining costs efficiently, effective use of organizational assets, providing product/ service differentiation and managing risks properly.
• Increase revenue drive through market expansion and quality service delivery whilst diversifying current customer patronage to other exiting services within the organization.
The diagram below seeks to illustrate how this can be achieved.
How Can This Be Achieved?
These are strategies which I believe will increase revenue by driving market share, weaken competition, cut operating costs and maximize profitability. To achieve this you will need to consider the following options:
Differentiated Service Delivery: This can be achieved by differentiating services such that consumers become attracted to the service because of its unique features. Another approach which many organizations fail to prioritize is its customer service drive. In today’s business world, customers are increasingly knowledgeable about service standards and above all consumer rights, hence the increase in buyers bargaining power. Exceeding customer expectations has become a must do for any business that is serious about profitability, loyalty and customer trust.
Budgeting and Costing Strategies: Here, I suggest you operate a zero based budgeting approach in which all expenses must be justified for each new period; as such every function within the organization is analyzed for its needs and costs. An effective costing strategy suggests you operate a lower cost of production while keeping price constant in other to reduce costs and increase profits. To effectively achieve this, find ways to cut costs across board by ensuring all cost drivers are lower than that of your competitors.
Internal control and auditing will equally be key to ensuring costs are efficiently managed across cost drivers.
Effective and efficient use of organizational assets is key to driving revenue growth. This can be achieved by:
• Disposing obsolete/ idle assets to reduce costs.
• Revamping faulty assets cost effectively and reinstating them into use to increase revenue
• Ensuring optimal usage of all assets for profit maximization.
Risk Management Strategies: Managing risk is an essential part of any business. Business risks may appear in any facet of the business. Risks and uncertainty are realities every business must face. For instance, these risks could be: Financial Risks, Economic Risks, Production Risks, Human Resource Risks, Legal Risks, Political and Social Risks, Management Risks and Market Risks. Improperly anticipating risks or managing them when they occur will eventually lead to revenue loss and ultimately business failure.
There are basically 3 ways to manage business risks;
• Transfer the risk
• Mitigate the risk
• Ignore the risk
Marketing and Distribution Strategies
Marketing and distribution are essential elements to increase revenue along various lines.
Expand Total Market Demand
This can be done by introducing your services to those who are not aware of it yet, those who are aware of it but do not use it and those who use it but have not taken advantage of the companies complete product offering
Protect Current Demand
Protecting your current market is a good way to ensure you do not leave yourself exposed to attacks that lead to losses. Constantly review the service in a bid to include additional functionalities. To achieve this i suggest:
• Advertising as a tool to constantly remind customers of the companies’ services.
• Leveraging on an area of competitive advantage to drive profits along that profit line.
Increase Market Share
The company must continually seek ways to increase its market share. Increasing market share can be done through new service introductions, boosting current performances through target driven approaches, increasing marketing and distribution efforts to new geographical areas and technological avenue such as social media etc.
The above strategies for revenue growth are a few amongst others. However, I do know that every organization is unique in terms of its strengths and weaknesses and the challenges it faces. Where your challenge is a unique one, please feel free to reach me through the contact form.