MBA2231 How to Increase Your Profit Margins without Upsetting Customers

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It's time for Dell Tech Day's annual sales event celebrating our customers with fantastic deals and benefits. Product perks include Dell rewards, free shipping, premium Support and more. PCs like the Dell 14 with Intel Core Ultra processors will help you do more faster and with a premium suite of monitors and accessories, you can upgrade your whole setup with amazing savings. Visit Dell.com deals. Hey oh. Welcome to the Hundred Dollar arm, a show business truths you can count on every single day with our daily 10 minute business lessons for the real world. I'm your host, your coach, your teacher Omar Zenholm. I'm also the co founder of Webinar Ninja, an independent software company I started with my co founder back in 2014. And in today's lesson you'll learn how to increase your profit margins without upsetting your customers. Many business entrepreneurs know they need to be making more money, specifically more profit, but are afraid that if they raise prices to do so, they're going to disgruntle their customers. Well, I'm here to tell you that this is simply not true. Not only because raising prices can be done properly, but it's not the only way to raise your profit margins. There are other ways to make better margins without jacking up your prices and making your customers furious. And I'm going to share with you what those things are. This is not theory, these are things I have applied in my own businesses over the last 20 years that not only not upset my customers, it makes them even happier to be customers. More importantly, your business will be making more profit allowing to reinvest in your business and scale it further. Let's get into it. Let's get down to Business, I want to begin today's lesson on increasing your profit margins without upsetting your customers by sharing two principles that are going to guide us throughout today's lesson and in your journey of making more profit. The first principle is understanding. How do you increase profits in the first place? How do you increase your profit margins, meaning the difference between your expenses and how much revenue you make? Well, there's only really three ways and sometimes, depending on your business, there's only two ways. So this is actually quite simple. The first way is lowering your expenses. Now, I do recommend that you review your expenses regularly, every three to four months and see if there's anything you can cut or save on or improve. But there's only so much you can do with your expenses. Even if your expenses were zero, you can't go beyond that, right? Actually making it quite hard to increase your profit margins if you are only using the lever of lowering your expenses. So that's one way. And I do recommend you revisit your expenses, like I said, regularly, but it's not going to really drastically increase your profit margins. Now, I say drastically because we should all be aiming as business owners to really have high profit margins. The best businesses in the world understand this. All the businesses and brands and products that you consume regularly have very high profit margins. And therefore they're able to last a long time because they can reinvest in their business and grow, hire new people, innovate. A good example is the iPhone, Apple's iPhone. Profit margins are ridiculous on this phone. Yes, they mass produce. Yes, they have contracts. Yes, they're able to have mass appeal. But there's a lot of things they do that you're not seeing that constantly increases their profit margins. We'll talk about them later. It's not just the price of the phone. McDonald's, for example, you think a value meal under five bucks is a pretty good deal and it's pretty cheap. How they making profits? You better believe their profit margins are super fat. For a fast food restaurant, they have pretty high profit margins. According to their last report, their net profit margin was over 25%, which in the food industry is insane. So you have to actively try to make as much money as possible. This doesn't mean you're not giving your customers as much value as possible. We're going to get into that as well in today's episode. So the first principle is understanding there's really only three things you can do to increase your profit margin. We talked about lowering your expenses. The other two is one, getting New customers, getting more and more customers. And number three is increasing the revenue you make for every customer. That means if you have 10 customers a month, every customer that you have every month, you're actually making more money from each customer. The second one is just getting more customers. And a lot of people resort to this. I just need more customers. Well, actually, you actually need to make more money per customer. Because if you can actually nail that for every additional customer you get, you're making even more compounded revenue. And where I said some businesses, only two things will move the needle when it comes to profit. Well, that's because some businesses, their cost per unit, their cost per customer doesn't change when they scale. And number two, doesn't really do anything, meaning that it doesn't matter if they have 10 customers or 100 customers, the profit margin they make per customer is the same. This is often the case with a lot of retail and physical products, where the cost of goods to produce things remain the same even at scale. And even if there is a change in expenses, it's marginal. It's not really going to move the needle. So what we want to focus on in today's lesson is the third way of increasing profit margins, which is increasing your revenue per customer. So the first principle you said is understanding how profit margins work. What are the three influences to profit margins? What affects your profit margin? The second principle is the service mindset principle. Your job as an entrepreneur is to solve problems, to solve your customers problems. They're probably coming to you right now to solve a certain problem that you focus on. Your product is that solution. Your service is that solution. But guess what? Your customer has more than one problem. They have many problems. Some of these problems you can solve yourself. Some of these problems you can't solve yourself. But these problems still exist. And the customers that you serve are willing to pay to solve these problems. If you have a service mindset, that means that you're at the service of your customers. You're here to help them. So if you can give them a solution to help them, then it's really your duty to do so. They're happy to pay for it, and they actually are thankful that you introduced them to this solution. I'm going to give you a very simple example. We use Basecamp as our project management tool to software. And the founders are David Hanemeier Hansen and Jason Fried. They solve a problem for me with this software, with the solution. I pay them every single month because I need a way to organize the my team, my remote team, and make sure we all know what we're supposed to be doing with our to dos and our tasks and we can easily communicate with each other. So they solve this problem for me. But as a business owner, I have other problems that need solving. I have other challenges. One of them is just being overwhelmed as an entrepreneur with all the things I have to do and putting so much pressure on myself. They know this because they know their customers. And they published a book called it doesn't have to be Crazy at Work. This book helps people that feel overwhelmed and feel like they have to do a million things at once. I bought this book because it helped me get a new perspective. I wasn't upset at these guys or basecamp for publishing this book. I was super happy and I was so thankful they published it and shared their thoughts because it helped me in a big way. They charged for this book, obviously I paid them happily. So somewhere in their database on some spreadsheet, they have made more revenue from me by providing another solution. So you might be saying, Omar, are you saying just sell to your existing customers new products and services? Well, that's one thing. Yeah. You sure you can do that? And that's a great solution. If you have a skill, a talent, a service, a product that can help them go ahead and do so. Because you can make more revenue per customer that way. But it doesn't have to be that extreme. It could be something quite small. One little feature, one little tidbit, one little helpful thing. For example, a lot of people worry about raising their prices. And one thing I suggest to my students is, hey, before you change the price of your current plan or package or product, offer an upgraded version of this product with something additional, additional value. So people feel like, hey, I'm getting more and that's why I'm paying more. Even if that thing is just a small mini course on how to implement whatever you're offering, whether it's a technique, whether it's a software, whether it's a physical product, how to get the most out of the product. I used to do this when I used to have my e commerce store and sell custom tailored clothing for men. I used to sell along with the clothing as an upsell, a guide on where to wear this clothes for what occasions, how you can dress it up with accessories, things like that. So going back to our example, instead of just raising your prices, offer your current package, your current product with a bonus of some sort to increase the value and give that a new price. Hey, you can go with this basic one or you can go with this extra cool one that has something that you actually really love and want and will solve another problem and make the price difference whatever price you wanted to raise your prices. So if you wanted to raise Your prices by $10, $15, $300 Whatever it is, new price for that bundle offer. You don't even need to sell products that you create yourself. You can recommend other products that solve other problems to your customers as an affiliate. There are plenty of people that do this in their newsletter. They run webinars as affiliates. They even sell full on courses on how to implement some of these products and use their affiliate links through the course. Heck, you can make more revenue from somebody else, not your customers. You can have sponsors in your email newsletter. You could definitely do this with any kind of free product or service. A newsletter is a free product or service. But even if you have a free version of your product or service, you can run ads in there. What Spotify does, right? The free version has ads. So you're utilizing all these opportunities to increase your revenue, make more money per customer, but also make more money in general without increasing your expenses Introducing Fidelity.

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To wrap today's lesson, I want to share with you one more tip when it comes to increasing your profit margins without upsetting your customers. Sometimes you can just start charging for things you weren't charging for before. This doesn't upset anybody because this is a whole new product. For example, I used to run two hour workshops, three hour workshops, full day workshops for free. I'm talking about online webinars. There were detailed coaching sessions I did this to grow our audience in the beginning of our career in Webinar Ninja back in 2014. I did this over and over and over and it was fine. And now that we've grown our email list, that content is actually quite valuable. I have those recordings. Now I have the option to take those recordings and sell them as inexpensive courses. $19 $25 $30. I can even just start testing out pricing and see what's the best roi. Again, I am not producing anything new here. I already have the recordings. I'm just charging for something I gave for free before. I have new people that are exposed to our brand and business and this is great information that's well worth what I'm charging and then some. In fact, people will value it more because they paid for it. They'll take it seriously and they'll take action. This is scientifically proven. I also have the option of running that workshop live again, but now charging for it. And Shameless Plug, if you want to do that easily, you can use our latest software, Course Ninja, where you can easily run your live workshops, courses and coaching with one tool. You can check it out at Course Ninja Co. But Shameless Plug aside, I just wanted to give you an example of Sometimes we have things that we can sell that we don't even realize, allowing us to have more revenue and serve our customers in different ways, solving more problems for them. That wraps up today's lesson. Thank you so much for listening to the $100 MBA show. If you love what you hear, hit those triple dots in the top right hand corner of your favorite podcast app. Whether it's Apple Podcasts or Spotify. Hit those dots and hit Follow. By hitting Follow, you subscribe to the show and get our next episodes automatically and have access to over 2200 business lessons in our back catalog. Before I go, I want to leave you with this whenever you feel like, I don't know if I want to offer something new to my customers. Maybe that's too pushy. Maybe that's too much. Maybe they're going to get sick of me. Ask yourself the question, do you ever have those feelings when you go anywhere and they offer something new? When you go to a restaurant and they say, hey, we have a new special, do you're like, oh, a new special. I hate this. This is horrible. When you go to the supermarket and there's a new product on the shelf, are you like, oh, this supermarket? Stop being so pushy? No, of course not. In fact, it kind of is intriguing and you're interested. Oh cool. What is this new product? What is this special today? And there's no compulsion. If you like it, you can buy. If you don't like it, you don't have to buy. Same goes for your customers. Thanks so much for listening and I'll check you in tomorrow's episode for air Friday. I'll see you then. Take care. Of.

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