Why are we in business?

It's a simple question. What is the goal of being in business? The best definition I have found is to make money now and more in the future. So, hopefully, wherever we are in our current business situation we are making a profit now. I know that's not true for everyone, but I sure hope it's the goal for every business owner. Then, most if not all business owners would like to be making more money (profit) in the future.

There are only two things we need to do to meet these goals, first we must try to increase revenues and second we must control costs. Sounds simple, right? Unfortunately, we all know intuitively that it is not.

In these tough economic times the popular notion is to focus on cutting costs. The problem with that is that costs can only be cut so far before the business suffers.

In this article I'm going to focus on increasing revenues. If done properly, revenues may be increased indefinitely, only being limited by market demand (and even markets can be grown). I'm going to focus on two aspects of growing revenue, customer acquisition and earning additional revenue from existing customers.

First let's talk about acquiring new customers. Again, this is a relatively simple process. The challenge comes in the execution. If we assume that our product or service is actually in demand then we simply have to inform prospective clients that we have a product that they are seeking and differentiate our product or services from the competition. Our objective would be to spend as little as possible to acquire each new customer. This is our cost of acquisition. Hopefully, the revenue generated by our new customer exceeds the cost of acquisition giving us a positive net customer value.

Of course there are myriad ways that we can inform the public of our product offerings, we can use TV, radio, newspapers, yellow pages, billboards, or even word of mouth. Of course, none of these are free and most are quite expensive. None have any guarantees. We could potentially spend many thousands on advertising and never acquire a single customer. So how can we mitigate our risk?

I intentionally neglected to mention internet marketing because I feel it should be considered separately. Internet marketing costs money too, but there are ways we can assume some control of the risk. We still need to do the research and use our resources wisely, but it is the only medium I am aware of that is truly interactive. Where else can a business owner only show their ad to people who are specifically looking for their product or service? There are paid and free methods of internet advertising. By free I mean that no third party is collecting a fee for running your advertisement. Even with "free" internet advertising, money must be spent doing research, building websites and attracting visitors to the website. Paid internet advertising may show results much faster, but can also become a money pit if the person developing the campaigns is not well schooled.

The internet offers many opportunities to grow a business if we are willing to learn how to master its ins and outs and avoid the potential pitfalls. We can specifically target our best prospective customers and choose not to waste money showing our advertisements to those who are unlikely to want our products anyway.