How to Increase Profit in Business

There are two things in business that just don’t make sense to me:

1. Businesses spend $500 billion globally on marketing ie. NEW business and just $9 billion globally on customer service. More on that in another post. (Source: ‘Hug Your Haters’ by Jay Baer)

2. The majority of businesses don’t have formal feedback processes at the end of client engagements.

In both cases, they’re missing a trick – the one that helps you increase profitability.

Profit is what’s left after you pay all your costs. There are far more costs associated with completely new-to-you business than there are with new opportunities from existing clients. Which means less profit.

And yet businesses continue to focus on NEW client accounts rather than investing in retaining and developing existing client accounts. New business is important, don’t get me wrong, but it’s far less profitable.

How Do You Increase Your Profit Margin Ratio?

The easiest way is to implement a feedback procedure at the conclusion of a client engagement.

Wait. What? How does talking to your clients increase your profit margin ratio?

Stay with me here. A formal feedback procedure allows you to learn about what you have done well and how you can improve your service for this client and others. It also allows you to proactively address the things you know you could have improved, as one of my workshop participants told me. Clients love that! And clients, maybe even more than human beings in general, love to be heard.

You’re deepening and improving the client relationship. You’re getting feedback on how to improve your service. And you’re listening to your clients. All worthwhile on their own merits.

Talking to Your Clients Yields New Opportunities

But this is the perfect opportunity to take the conversation a little further and find out what other opportunities are coming up for your client. Is there another project that you could complete for them? Is there something they’re planning that is part of a new service offering you will be providing that you haven’t yet made public?  How else can you support your client? If you don’t ask, you’ll never know. And you’ll miss out on revenue generating opportunities that are ripe for picking AND that will increase your profit margin ratio.

In a workshop I taught recently for advertising professionals from agencies of all sizes, only 15% had any kind of formal feedback process in place. Yes, they had regular client review calls and meetings, but these only addressed the work that was already taking place. 85% were not proactively asking for feedback at the conclusion of the engagement. More worryingly, no one was asking clients about other potential opportunities, AKA other ways to support their clients.

How can a business increase profit if they don’t find more opportunities within existing client accounts? Only by cutting costs while continuing to find new clients. Sounds like much harder work than simply talking to your clients.

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