In the business world, you either adapt and grow, or get left behind. Savvy business owners are always looking to the future and thinking one step ahead. But every business move comes with risks. The wrong move could bankrupt your company. The right move could be your most profitable one yet.
Thorough planning, forecasting and data analysis can help you reduce risk and make sound decisions based on logic rather than emotion.
Here’s how to make your next business move your most profitable.
Use What-If Business Modeling
Decision-makers have a wealth of data at their fingertips, and that data can help them make smarter moves with more predictable outcomes. What-if analysis is a decision-making tool that leverages this data to see how a decision may affect different areas of your business. When used correctly, it can help you make smarter and more informed decisions.
What-if business modeling can help answer crucial questions, such as:
- If the cost of components rises, what would happen if we charged more for our product?
- If we only launch our product in urban areas, then what will happen?
- If we price our product low, what happens?
Sit down with stakeholders and come up with what-if scenarios to plug in. A thorough what-if analysis that considers all scenarios will help you determine whether this is a good move and how to make it the most profitable.
What-if business modeling tests all possible market scenarios, allowing you to make informed decisions based on those results. Additionally, you can tweak your model as needed to find a strategy or offering that will be profitable for your business.
While your analysis won’t eliminate risk entirely (that’s simply not possible), it can significantly reduce it. Using historical data and market trends, you can make relatively accurate predictions of the outcome of your business move.
Test the Waters Before Investing
It’s easy to get caught up in the excitement of a new venture, but before you go all in, it’s crucial to test the waters to make sure that you’re making the right move.
Don’t spend a lot of money on new products, new offerings or marketing until you have gone through the testing phase.
Even multinational corporations test product launches and other business moves before making a full commitment. Testing allows you to measure how well your offering will perform, but on a much smaller scale. In addition to keeping costs low, testing will also help reduce risk.
If the offering doesn’t perform well during testing, you can reformulate your idea or scratch it entirely. On the other hand, if the results are promising, then further investment may be warranted.
One way to test your move is through a limited release. See how your new product or service performs in certain locations to gauge whether it will be a profitable decision. Make sure that you’re measuring your results so that you have ample data to analyze.
Another option is to test the market online just to see if there’s any interest in what you want to offer.
- Check online forums on sites that are related to your offering. Are these forums active? Do they have a large user base?
- Tools like Google Trends, Keyword Planner and Insights can also help you gauge interest. For example, are people searching for what you want to offer? If so, how often? Where are these potential customers located? Are these search terms growing in popularity?
Testing is critical if you’re considering a new business move. Along with reducing risk, you can also help determine whether the venture will be profitable.
One great advantage of testing is that you can get an idea of profitability without having to take on too much risk. In addition, the data you collect from testing can help you gauge whether the offering will be worthwhile.
At the end of testing, analyze your data and consider:
- Profit by profit center: How well did the product/service do overall? Was there interest, or were customers not engaging with your new offering?
- Profit by customer: Were the costs associated with customer relationships too high, or just right? Can you find ways to improve customer profitability?
- Profit by employee: A high ratio of revenue per employee indicates that your team is productive. Productivity typically leads to more profits. If the ratio is on the low-end, the venture may not be worthwhile.
Focusing on these key areas will help you predict whether your new venture will generate a profit and whether it’s enough profit to be worth your while.
Get Feedback from Customers and Employees
When considering a business move, two of your greatest assets are your customers and employees. These are the people who work with and use your product/service on a regular basis.
Try testing with a few customers. Give them a chance to try your new offering, and run a survey to get their feedback.
- Did customers find your offering useful?
- Would they be willing to pay for your offering?
- Is this an offering that will improve customer loyalty or experience?
Customer feedback is incredibly valuable when considering a business move. After all, they are the people you will (likely) be targeting with your new venture.
It’s important to remember that customer feedback is just one piece of the puzzle. Your employees will be involved in the launch and sale process, so it’s important to get their input as well. What are their impressions of the offering? Will they need additional training in sales or production?
Make Sure the Business Move is Aligned with Your Vision and Mission
Before making any business move, sit down and really think about whether it’s aligned with your brand’s vision and mission. If it’s not, you risk alienating your existing customer base and damaging the reputation that you’ve worked so hard to build.
To grow and thrive as a business, you have to take risks, but it’s important for them to be calculated risks. Whether it’s launching a new product or partnering with a company, every business move should be carefully considered. Using what-if analysis, testing, getting feedback from customers and ensuring that the move is aligned with your business can set you up for success.
That being said, if you want help in making sure your next business move is your most profitable, we’d love to see if we’re a good fit to help. Click here to book a call with us to discuss how we can helpTags: Profitable business moves