Summary: Do you want to know the secrets to make a profit in your business?
Profit is the lifeblood of business, but many entrepreneurs are so focused on growth that they forget to create a profit plan.
If you’re not making a profit, it’s hard to invest in your team or technology. You can’t afford marketing and advertising because you don’t have enough cash flow. And if you’re struggling with cash flow, then growth is going to be tough too.
This article will teach you how to plug all the money leaks and build a well-oiled machine that makes more money for you every day – no matter what size your company is – from solopreneurs up through small teams and even large companies! We’ll show you six strategies that will help your business make more profit while giving you back time & energy!
What is Profitability?
I have a saying that I like to share when I am speaking at events, and that is, “Revenue is vanity. Profit is sanity, and cash is queen.”
Profitability, as you probably know, is the measurement of your financial gain.
Business owners are taught to focus on the top-line number and not the bottom-line number, but that bottom-line number is your net income which generally is your profitability. Your net income is in dollars, and profitability is in percent.
The Common Battle With Profitability
Many business owners struggle with profitability. A major reason for this is that they treat profitability as a reward and not as an intention. They come into small business ownership seeking freedom and with a desire to create their own story. This freedom and prosperity is the first thing that is often traded.
We get sucked into the hustle and grind, and that is what is often sacrificed. As an entrepreneur, your business means a lot to you, and with this, that hustle and grind can take over. The important thing to see is that doesn’t serve you either.
Profitability is something that affects businesses of all sizes. Crossing the million-dollar milestone doesn’t mean that profitability is no longer a battle. You have to think about profitability as intention versus expectation, and that is why we will be discussing six strategies that we use in our work with other businesses to fix profitability.
6 Strategies to Make a Profit in Your Business
1. Know your costs so that you can invest.
Every business has costs. What are your costs of goods? Overhead operations? Production costs?
Some people are so eager to cut their costs that they cut too much. This is why it is important to know which costs are actually a return on investment and don’t need to be cut.
If you have ever made an investment in your business that didn’t work out, such as a team member or client not going well, it can be easy to fall into the pattern of penny-pinching or cutting too many things out. This isn’t the only knob that you can turn in your business, though.
2. Find the right price.
This is the knob in business that scares so many entrepreneurs. It is a mindset problem that I see so often. Raising your price feels sensitive, right?
Everyone feels that people don’t want to pay. Yet, we never ask, how can we make it simple to pay? How can we make it so easy to pay?
You can see on paper how a price increase benefits your profitability, but the biggest hurdle to overcome is your mental blocks, and mindset shifts about increasing price. I have had clients double their prices. For one, only one client out of 110 said no, and it wasn’t because of the price but because they were moving. So take the plunge! Don’t fear price increase; embrace it.
3. Recognize the scope creep.
You have some finite resources, but your most finite resource is time. When projects take longer than they are supposed to, this decreases profitability. This is because it takes time away from getting other work done.
Scope creep happens when more tasks are added, increasing how long it takes for you to get something done. This eats away at profitability. It is important to recognize the scope creep so that you can do things to mitigate it.
4. Avoid over-delivering.
Over-delivering is something that service-based businesses do all day long. It is in the management of our tasks, ourselves, and expectations. It is also something that erodes profitability.
It is a silent leak and a silent kill and actually goes hand in hand with scope creep. If you are spending so much time over-delivering, then you are letting your finite resource of time slip away.
5. Fix your time slippage.
When you’re in a service-based business, the longer it takes for something to happen, the less profitable that project likely becomes. This is what I call time slippage.
Time slippage is the act of something taking longer and giving the illusion that time is slipping away. In business, time slippage can happen for a multitude of reasons. Here’s an example: when you really need to get back to a client, but you are so busy that it doesn’t happen for three days. Your attention isn’t fully invested in it, and you have to continually play ‘stop and go’ on your project.
This redundancy can lead to decreases in productivity and, subsequently, decreases in profitability.
The biggest way to start fixing time slippage is to identify and admit that it is happening. Fixing one-time slippage can start to fix the pattern in your business, and this can have a huge positive impact on profitability.
6. Make a product mix.
One of the services that I offer is a business audit. This is where I go in and look at all of the strategies that we have talked about for profitability, trying to find opportunities. Product mix is hands down the strategy that is a home run for finding opportunity.
It is truly easy for people to always sell the least profitable item in their service toolkit. I am not saying that you should never have them; sometimes, it makes good business sense to have a lower service profitability service item. If you know where the client needs to go next, then you can get more than one sale off of the client.
What I typically see is that the lowest-profit service offerings tend to consume the highest amounts of revenue. That means spending the majority of our time (80%) in the lowest 20% of probability.
If you aren’t keeping track of your numbers and looking at things like timesheets, you will have a hard time figuring this out. You have to understand that you need to focus on product B instead of product A. Have a range of products but make sure you are spending your precious time on the products that bring in profits.
Making a profit in your business doesn’t need to be hard or scary. Remember that entrepreneurship takes confidence and bravery, and using these six strategies will help you have both.
All of these strategies will help get your cash flowing again, and these are all strategies that I use with my clients. Cash flow will help you invest in bigger growth so that you can do all of those things that you have been needing to do in your business.
Looking for more help boosting profits in your business? Let’s chat. If you found this article helpful, make sure to share it with your fellow entrepreneurs!
If you enjoyed this article, check out 3 Easy And Unexpected Ways To Improve Small Business Cash Flow.