Published: September 28, 2021 | Updated: September 24, 2021

Increase profitability, increase business success

Deborah Dickerson

Deborah Dickerson

What’s the first thing that comes to mind when someone asks about how to increase the profitability of a business? Is it to increase sales? Many people think so and that’s inaccurate. In fact, when businesses increase sales, particularly dramatically, many times profitability is reduced, sometimes dangerously so.

The statistics on the profitability for small businesses are not good. Per SmallBiz Trends, only 40% of small businesses are profitable, 30% lose money and 30% break even. These can be pretty sobering statistics for business owners. As a business coach for the North Idaho College’s SBDC, it’s not unusual for business owners to not know whether or not they are profitable. Many don’t know until their accountant does their tax return whether or not they made any profit. This means that they can have no impact on earning a profit or not throughout the business year.

So, do you know whether or not you are profitable this year? How often do you review your profit and loss statement, once a month, once a quarter, never? If the answer isn’t at least once a month, consider what it would take for you to review your profit and loss statement at least once a quarter. Management guru, Peter Drucker said, “what you measure gets managed.” So, let’s start there by putting a structure in place to regularly review your profit and loss statement.

Below are three additional practices which you can incorporate into your business to increase our profitability.

1) Increase customer retention

It is a known metric that it costs 5-10 times more to gain a new customer rather than retain an existing customer. Another impressive metric is increasing customer retention by 5% increases profit 25% to 95%. So, the next time you are reviewing your sales strategies, ask yourself and your sales people, how to increase customer retention? It’s a worthwhile conversation!

Follow this basic strategy from Hubspot to get you started on a basic customer retention program.

A) Track and analyze churn metrics.

B) Implement a customer feedback loop.

C) Maintain a customer communication calendar.

D) Send a company newsletter.

E) Start a customer education program.

F) Build trust with your customers.

G) Offer unique services.

H) Start a customer retention program.

2) Ask for referrals

Referrals continue to be the tried and true practice of gaining new customers with minimal cost or time on your part. Yes, even in today’s digital world, referrals rule. In digital marketing, these are known as reviews. Top review sites include:

• Google

• Yelp

• Houzz

• Tripadvisor

• Healthgrades

• Facebook

• Amazon

Only cultivate reviews where your target market is. Be sure to include industry specific sites that are pertinent to your business. For a new business, reviews lend credibility in a way that nothing else does.

The single most crucial review is a Google review which takes place through your Google my Business (GMB) listing. If you don’t have a GMB listing, do it today! Just listing your business and getting reviews can increase your business and profitability with little or no cost to you. Per Bright Local, 5% of GMB listing views result in a website, call, or direction request. The average business is listed in 1009 searches per month which equals up to 50 new leads/contacts.

Google will list what it thinks are the top three businesses in a location-based search. Google reviews make a difference. Start asking for them today!

3) Increase the average order size

Another way to increase your profitability is to increase the average size of your customer order. There are two primary ways of doing this; upselling or cross selling. Upselling is selling a higher quality item. This is common with appliances and cars. Cross selling is selling additional items which go along with the base item. An example is when you buy a phone, buying an extended warranty. In a restaurant, this looks like bringing over a dessert menu as the table is cleared. Working with an SBDC coach to review your business model could reveal the initial ways in which to increase your average order.

There are many, many other ways to increase your businesses profitability. At the North Idaho SBDC, our business coaches will help explore how to best do this through one on one confidential coaching with business owners.

Learn how to register for a business coach with the SBDC at, or call 208-665-5085.

• • •

Deborah Dickerson is a business coach at the North Idaho College Small Business Development Center. She is a 30-plus year business veteran, consultant with SNAP Spokane and an adjunct professor at Gonzaga University.