Profitability in small business is achievable.
If you have come across me before you will know that I am a Profit First Professional and an advocate for the implementation of Profit First in every business. What does this mean? It means that it is possible to be profitable from the very beginning of business and that profit needs to be a priority, not an after thought.
What gets in the way of profit from the beginning?
A common trend I see among business owners who are heavily concentrating on increasing their revenue, is that their expenses are also growing at the same rate as their income. The result: No Profit. No Growth. No Freedom.
The amount of businesses that have a turnover of 6 or 7 figures that are spending the same amount & therefore leaving no profit is common. This needs to stop!
What is the point of running a business if you end up with nothing or a token amount afterwards? All that hard work for no profitability, no return, this makes me sad.
There are a few things that you should consider when it comes to running a profitable business.
1. Know your break-even number
What do you have to bring in to meet this? Is this a reasonable figure? Does it include crazy expenses? Does it include your wage? Break it down. Get really clear!
The other thing to be aware of when looking at your break even number is to look outside of your business needs. What do you personally need to survive? What personal goals do you have? If you don’t know this, you will end up taking from your business to pay your personal requirements because you are not earning enough personally for what you really need. Most of the time business owners don’t consider this.
2. Look at your expenses
Look at your expenses. Do you know your minimum monthly expenses? Have you worked out your variable expenses? When looking at your expenses, which are absolutely necessary?
Are there expenses that you are incurring because you feel you should have them but they are not adding to your business? Are they giving you a return on investment?
Take the time to review your recurring subscriptions. Often this is where you can save a lot of money. Are all subscriptions the best price for what you need? Is there an alternative out there? Take an honest look at this as most businesses I work with are overspending and the expenses are up to 80% of revenue.
3. Do you have clear income goals?
If you do, do you know how to achieve them?
I find it is so common to hear people say, “yes I have an income goal of $100k”. However, when I ask if they can tell me how they can get there, no further thought has been given.
Are your services being priced accordingly so it is doable to achieve this target? Are you aware of which services are best to concentrate on?
Let me give you an example.
You may have a $1000 service that you could easily sell 10 of but each service requires 30 odd hours of your time to complete (ok that is an exaggeration but you get where I am going). Obviously this situation is not ideal as the time versus income is not really viable or worthwhile.
I invite you to map out your services and the hours associated with them for the price you are charging.
Are they working for you or against you?
4. Doing the right thing with your profit
Are you putting a percentage of profit away each time you receive a payment? I highly recommend you do. If you don’t, start now. Put 1% or 2% as a start.
It will make a difference.
Where does your business stand? It is profitable? Has this information given you food for thought? I hope so!
Profit First can benefit the growth of your business from DAY ONE!
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