Certainty is something every business owner craves, but changing business conditions can make forecasting your future a challenge. We spoke to Bill Lang, Chief Executive of Small Business Australia, to learn about strategies small businesses can use to help generate more predictable profits for greater certainty.
The ability to predict sales and costs with greater accuracy can offer you more confidence in the future and set you up for success. However, according to Bill, small businesses face a faster pace of change than ever.
“Small business owners are adaptable”, Bill says. “But the rate of change can make it hard for some to confidently decide on the right course of action. And if an owner feels uncertain about their future prospects, they might be less likely to make the investments they need to be successful”.
The ability to look to the future with more confidence can be incredibly valuable in more ways than one.
Small business owners in Australia are already more likely to work more than the median number of hours per week. According to the latest Small Business Matters report from the Australian Small Business and Family Enterprise Ombudsman, over sixty percent of SMB owners with between one and 19 employees work 39 hours a week or more.
According to Bill, “it’s common for business owners to feel their life is ‘owned’ by their business”. So, having greater certainty about the future of the business can help improve business owners’ mental and physical well-being.
There are multiple ways marketing can support your ambition for a more predictable business result. The first is by helping you understand your customers.
There’s a view that marketing is limited to advertising and promotion. In fact, marketing can be much more strategic, Bill says, “marketing should inform your selection of target customers. Done well, and integrated throughout your business, it helps identify your ideal customers and learn what they want from you”.
Effective marketing should also assist in generating more predictable profits by offering clarity on the return on advertising and promotional activity.
As Bill explains, “if you have the right data, you can see how well your channels perform. Then you can say with more confidence that investment in an activity will likely result in a given number of sales.” This enables you to plan costs and forecast revenues and margins more effectively.
Once you know your customers and make the first sale, the next step to more predictable profits is to keep them coming back.
“Customers are one of the most valuable assets a business has”, Bill says. “Everyone in business knows that it's often much lower cost to sell something else to an existing customer than getting a first-time customer”.
Bill says “loyal customers are more likely to buy from you again, refer others to you and pay more for your service or product”. Building a loyal customer base requires a deep understanding of customer needs, and when and how to communicate with them.
An example Bill offers is a vet practice. The vet sends out regular communication about appointments, treatment follow-ups, and seasonal advice. The vet also uses its knowledge of the customer’s pet history to provide a personalised service during appointments.
Doing this manually for hundreds of customers would take up a lot of time. “This approach requires more than just an email account or a website”, Bill says. “You should consider using tools that can help you automate your customer relationship management”.
A loyal customer base can also help you develop better products.
“We have some very innovative members of Small Business Australia. They approach their customers to get feedback on product ideas”, Bill says.
Bill gives an example of a business that asked their customers to vote on their favourite product designs. They were able to say, ‘we need a minimum of 50 orders to make it worthwhile’. Customers were already invested in the product through the vote, so they committed to the purchases.
Strategies like these enable a business to invest in production with the knowledge they’ll be less likely to end up holding onto stock no-one wants to buy.
One crucial means of generating more predictable profits is to find more efficient ways to operate.
“There are significant opportunities to remove manual work, particularly data entry”, Bill says. “This has the twin benefits of giving you better data, which can help informs the other strategies, but also frees you up to focus on profit-generating activities”.
Bill recommends using partners where possible to help you concentrate on your core business.
Focus on what you are strong at. And get the partners around you to do the other things.
- Bill Lang, Chief Executive Small Business Australia
The central thread in Bill’s advice is the ability to collect data and connect with customers more than ever. This is where technology can play a vital role here.
“Technology can help you collect the right data and engage with customers at the right time and place”, Bill says.
Technology is the central nervous system of any economically sustainable business.
- Bill Lang, Chief Executive, Small Business Australia
“Technology can help you collect the right data and engage with customers at the right time and place”, Bill says. This can help you better understand how your business is performing, so you can forecast likely revenues and profits more accurately.
Nothing is certain in business. But using a detailed understanding of your customers and your business operations can help you better predict your profits. It can give you more confidence to make the best decisions and invest to set you up for future success.
For more practical advice on staying ahead of the game, you may want to check out the Small Business Australia 2023 conference Get The Edge Keep The Edge – in October.
Disclaimer: This article does not necessarily reflect the views of Telstra or its staff.
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