In 2013, the fourth quarter saw a rise in revenue for small business, but profits nose-dived, according to an article in Entrepreneur. This can happen when small businesses invest in unprofitable customers and products during holiday promotions.
Small businesses need to be able to determine which customers and products are profitable. Here are the do’s and don’ts for increasing revenue and profit during the holiday season.
1. Focus on your high-margin offerings. Sell the items that yield the highest gross profit. If you aren't able to identify those items on your own, enlist the services of a bookkeeper or accountant. Every product you promote and sell should protect your bottom line.
2. Make it easy for customers to find you. Your website should be clear and functional with easy navigation. It needs to load quickly and have smooth integration with the payment provider. Customers should be able to easily complete a transaction online. Many websites lose up to 60 percent of revenue in abandoned transactions. It is always helpful to have people test your website to ensure you don’t lose sales. Ease of navigation and the ability to complete sales are far more important that a variety of products and features on your website.
1. Do not lower prices to sell more. Convenience, differentiation and post-sale services add value to your product. When you lower prices just to sell more units, you attract customers who are sensitive to prices, but not loyal to your store - they aren't likely to return as a customer in the future. A better option is to get more customers in your store and offer them more value to justify your prices.
2. Do not give away a dollar for a dollar. Instead, offer something that cost you less than the value it holds for them. Sometimes it makes more sense to offer a free gift than to extend discounts to customers.
3. Do not worry about acquiring new customers. This could cause you to miss out on the relationships you have already started to build with existing customers. According to Harvard Business Review, you can see a 25 to 85 percent increase in profits by improving customer retention by only 5 percent.
According to the National Retail Federation, 20 to 40 percent of sales occur between November and December every year. Following these do’s and don’ts can help you to make the most of this high sales volume period.