Small businesses can struggle with profitability for a number of different reasons. They keep the prices too low. They focus more on big ideas than real consumers. They have many, many, too many expenses. The list goes on and on.
But even if your business does not make much money in the beginning, the goal should be to support the operations and make a profit. To do this, you must follow a set of do's and don'ts.
To learn more about some effective methods of improving profitability, Small Business Trends recently spoke with Sam Pillar, CEO of Jobber, Planning Software Provider. Here are some tips to help you earn more and reduce excess expenses.
How to make more profits in your small business
Calculate the exact costs for your business
Before you focus on increasing profits, you must know where you are going from here. This means that you need to know all your costs. And do not just calculate overheads. You also need to know how much your regular business is worth for your business.
Pillar explained in an e-mail interview with Small Business Trends, "Profitability is not a rocket science – it's about the relationship between revenues and expenses. Get a very specific vision of what's called "the unit economy" – what does the entire micro-level revenue and cost chain look like (ex. : How much does a minute of driving time, performance of a specific machine, etc.) – is essential to support the company. Get a clear, accurate and real-time visibility of the economy of your unit is the key When owners can find the bandwidth needed to focus and spend their time on important things, they tend to make good decisions. "
Do not spend too much time on low value activities
Once you know what your time is worth, you can focus more on the elements that drive real results for your business. It means removing things that do not add much in value terms.
Pillar adds, "Managing a small business is a global world – once the business starts to grow, the biggest mistake people make is spending too much time on essential, but low-value activities . A good example is payroll, accounting, billing, scheduling – all activities are essential but can often take too much time for a business owner, employees and office staff.
Automate where it is possible
Since some of the low value or mundane activities you want to remove are essential functions, you need to find ways to accomplish them without spending a lot of time. It is here that automation software and online solutions come into play.
Pillar states, "The automation of these tasks frees a lot of time needed to work in the company rather than in the company. The emergence of mobile solutions for these vital but low-value businesses has allowed companies to manage their team, their customers and their billings from almost anywhere and often on a single platform. . solution. "
Do not be fooled by paper
It is also a good idea to dispose of as much waste as possible, both in terms of expense and time. Using paper in your systems and processes can be extremely inefficient because it can get lost and be more expensive than using online tools or automation.
Keep track of your time
You must also know exactly how you spend your time if you want to eliminate other types of waste in your business. Use time tracking software or keep track of it manually so you can get a good idea of what's going on.
Do not Forget Your Team
However, there can also be tons of waste when it comes to the way your employees spend their time. So you must also find ways to keep track of this and hold people accountable.
Pillar says, "For many small businesses, the biggest expense is people. Salaries and related pay are just one of the factors employers need to consider. The time and effort that these employees consume can result in lost revenue and profitability for business owners if they are not spent effectively. In service-oriented companies, especially those who work outside their own offices, factors such as driving time and fuel costs are pretty well understood today. As a technology company, we know that productivity lost due to ineffective communication between employees, leadership and / or customers, the costs inherent in managing the business without the technology benefits and valuable time valuable tasks all contribute to the erosion of your profitability. "
Analyze your finances regularly
Once you have set up tracking systems of things like time, expenses, and income, you must keep an eye on these things regularly. The analysis of any change can help you determine what works for your business and what does not.
Do not lower the customers
One of the main mistakes made by companies and which results in low profits is under-invoicing. If your prices are so low that you can barely cover the expenses, you might want to rethink your offers to make everything more sustainable.
Make buying as easy as possible
Another potential hurdle is a difficult buying process. If customers have to go through 10 different hoops to make a purchase, they are more likely to choose a competitor.
Do not focus too much on bringing in new customers
Even though it's always good to be open to the idea of attracting new customers, you should not be too focused on them, to the point of neglecting current customers . You can potentially make more profits by focusing on increasing sales to existing customers.
Preventing theft and Garbage
You might not be able to prevent any wastage and theft in your business, but that does not mean you should not try. Put systems in place to detect and alert you of any problems or anomalies so that you can respond to them as quickly as possible.
Do not rely on constant updating
Even if your current prices are sustainable for your business, you can sometimes offer discounts to attract new customers or move inventory. While this may be a decent strategy at times, it can certainly be overused and devalue your products or services.
Seek ways to increase the minimum price of orders
Instead of offering basic discounts, you can try to increase your sales by offering bundled discounts, bundles, or similar offers aimed at increasing the size of orders so that the company can do it. company earns more money.
Do not keep excess inventory at hand
It can also be a little pointless to keep tons of inventory in hand, since you have to store it and manage it. Thus, can be beneficial in offering rebates or incentives to move any excess if you get new products.
Give more opportunities to the best sellers
When it comes to selling products, it makes sense to put more stock in what has been proven. So when you have new prospects or new opportunities, make sure your best sellers are in the market so that you have the best chance of closing.
Do not forget the price increases of suppliers
Paying suppliers and sellers is often part of running a business. Although you can not control the prices charged by these suppliers, it is important to always keep track of these fees and to note the changes so that you can consistently get the best prices.
Do not negotiate constantly
It's also a good idea to negotiate with suppliers in order to get better prices rather than just paying the total cost, which can sometimes be excessive.
Do not pay for expensive services and activities
In some cases, you may even want to remove some providers or service providers if what they provide is not worth the cost.
Confirm service calls
For service companies, a major source of waste may appear for service calls if the customer is not actually there. So for this reason, it is a good idea to confirm quickly before wasting time driving and doing the necessary administrative work for each call. Pillar even suggests automating this part of the process.
Do not underestimate your time
Just as product companies sometimes undervalue their physical assets, service companies can sometimes minimize profits by not valuing their time as they should. You must therefore set prices taking into account all parts of the process, including administrative tasks related to the provision of a specific type of service.
Let's focus on the provision of excellent service
No matter what type of product or service you offer, offering a great customer experience should always be a top priority. This can help you build repeat business and even earn referrals, which basically serve as free marketing.
Pillar says: "Do everything in your power to delight your customer, going beyond to provide an amazing customer experience increases the chances of repeat reservations, and could inspire your customer to recommend your business. Positive levers on the unitary business model of a business. "
Do not continue marketing activities that show minimal results
Marketing can be another important expense for a business. This can certainly be worth it in some cases. But if you've tried some tactics and seen minimal results, it's probably best to cut ties.
Keep track of the performance of everything
For everything from marketing to vendors, it's a good idea to constantly track performance and reevaluate the costs that are really worth it for your business. Then cut the rest.
Do not leave after every new opportunity that seems exciting
New opportunities can really help to grow a business. But that does not mean you should always run after the next big thing. Do careful research and examine the risks associated with new opportunities before you pursue them so you do not waste tons of time and resources.
Focus on the big picture
Once you improve the efficiency of your business in terms of day-to-day operations, you can focus more on the important and important aspects of running a successful business.
"Many customers believe that the most difficult parts of the business involve working on difficult things – finding good people, retaining them, acquiring more customers and managing their brand – these are the important things , rather than urgent things, for a business owner to work on – automating humble things can be very liberating, and have an impact on the entire business. "
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