How To Get To Profitability
How can you make your business profitable faster? As the owner of a small business, you’ve probably already thought about this. Here is our favourite advice; what’s yours?
Take Control Of Cash Flow
- Cash is king.
- It’s really important to have the cash that you need to do what your business needs to do.
- So, it’s important to look at all outgoing expenses. Make sure that all of them are absolutely necessary. One area to consider in particular is monthly subscriptions
Pay Peanuts, Get Monkeys
- There’s an expression in Spanish: cheap is expensive. You can usually see this when you’ve bought something cheap and it breaks or doesn’t do what you need it to do… so, you incur more costs to buy what you really need.
- But the idea of peanuts and monkeys is probably more applicable to staffing issues.
- Your employees are what will define your business success!
- More than anything else, they’ll be the ones to successfully work with clients, to support your work and to implement ideas.
- So, it’s not a good idea to cut corners in hiring staff.
- Make sure you have the best people you can afford to pay.
- Cheap is not always the best (see above).
- If your customers see value in your product or service, they’ll accept a price rise.
- The blow can be softened by being able to clearly explain the reasons for a price rise.
- You might also be able to point out the difference in value that you’re providing compared to competitors.
- If your customers buy from you purely on price, it’s just not sustainable.
- You may need to reassess your value proposition because as soon as someone else offers a cheaper price, all those customers will leave.
- Know your products, know your services, and charge what they’re worth, or more to make profits.
What Products Are Most Profitable
- Talking about knowing your products (see above), if you sell multiple products and services, you’ll need to be able to differentiate them for yourself.
- Make sure you account for revenue and expenses for each item separately.
- If you do not keep on top of your accounting, it is possible that you might be missing if one product could actually be causing a loss – or on the other hand, if one product is especially profitable.
- A lack of accounting will mean you miss out in being able to harness revenue growth by focusing on your most profitable services and products.
Not All Expenses Are Bad
- If you’re tight on cash, or if you value cash (see above), then it can be difficult to spend money.
- But the thing is, if something improves productivity, such as a software package, it can reduce costs in the long run.
- Similarly, marketing expenses can directly lead to sales, but they are expenses.
- So, evaluate when an expense now will help you in both the short and long-term, and then don’t hesitate to outlay the capital.
Another way to be more profitable is the careful use of a business loan to cover the costs to expand and build your business. Interest on a business loan should be seen as an investment in future growth