When it comes to business success, what counts the most? Happy employees? Big paychecks? Nice offices? The answer is none of the above. When it comes to business, all that matters is profitability.
When you’re first starting up, of course, your main objective isn’t profits. Instead, it is to maintain positive cash flow. You can run up a debt in the short term, no problem, so long as you can keep making payments and keep your business running. In the longer term, however, you need to change this state of affairs and move your business to sustainable profits. But how? Here’s what some seasoned entrepreneurs have to say on the subject.
Market To The Customers You Already Have
Charles Gaudet II is the CEO of Predictable Profits. When it comes to increasing company profits, he’s got a simple solution: market to your existing customers. He says that this is the fastest and, believe it or not, sexiest way to boost profits. Repeat purchases, according to Gaudet, are a lot easier to attract than new ones. He says that with the right marketing efforts, small businesses can boost their sales by up to 30 percent in a month. The trick here is to give an offer to “preferred” customers. In other words, don’t just blanket market to everybody who might want to buy your product. Go after your former clients with deals that’ll make them feel special.
Use Data Technologies To Smash Overheads
Keeping up to date with things like contract reporting can be very time-consuming and costly. But with the right approach to data, it doesn’t have to be. According to Allyson Ames, founder of the Wonderland Bakery, data is your friend. One of the best places to make use of data is to streamline many of your processes. Data driven custom reports, for instance, help businesses keep track of their supplier relationships. It helps to reduce the amount of time spent filing contracts and allow you to get on with the rest of your business. For businesses that rely on only a few people, this sort of data driven approach can be a real life saver.
Fine Tune Your Staffing Methods
Joshua Weiss is the CEO of a mobile app company. He recognized that his business, like many others in the sector, wasn’t reliant on hardware expenses. It was reliant on people. People are Weiss’s biggest cost and therefore, his biggest opportunity. Weiss was very careful from the outset not to employ people that he didn’t think he would need. His number one priority was to avoid taking on any more employees than was essential. To do this, Weiss knew that he had to take on a group of employees that were flexible. Employees had to be able to be versatile enough to take on new roles, not otherwise filled by the company. By doing this, Weiss avoided a large amount of unnecessary overhead and boosted profits.
Take Time To Review Your Prices
Matt Peterson is the owner of Big Shot Bikes. His main concern for small businesses when it comes to profitability is how they are pricing their products. We live in a competitive price environment, he says. This means that many new companies are tempted to try and undercut their larger competitors. Peterson recommends against this. He says that when companies do this, they often fail to make enough revenue to cover their costs. As a result, they wind up not being able to invest in expansion or new product lines. He suggests finding ways to charge a higher price by leveraging the inherent advantages of being a small business.
Question Your Business Model – Does It Fit The Industry?
One of the great advantages of being a small business is just how easy it is to adapt to changing circumstances. Small businesses are flexible and nimble, and can skirt a lot of “red tape.” Ben Patton is the CEO of Integrity Transition Hospital. He says that the fact that small businesses are nimble is actually good news for their long term profitability. Because small businesses are small, it means that they don’t have to use business models that don’t work for them. They can switch it up until they find one that does.
Patton points to the example Pixar. Pixar was once a hardware company. But it soon saw that it had a much brighter future in animated films. As a result, it quickly turned itself around and became the success it is today. The company is now worth more than $7 billion.
Always Think Creatively About What You Make
Nicole Giordano is a founder of a fashion startup. She thinks that businesses have to think more creatively about their products and services. For her, this meant building partnerships with other people to build awareness of her product. But for other companies, it can mean working with a different set of clients or building a new product from scratch.
Giordano points out that social media has had a significant impact on the riskiness of being experimental. Companies can now float ideas among their social media following to see if they are popular or not. Being creative, therefore, is less risky today than it was in the past.
Focus On Building Your “Ideal” Client Base
If you could choose your clients, who would you choose? Cheng-Wah Fong, chief consultant at CW Fong and Associates thinks that this is an important question to ask. Some clients, he says, just aren’t profitable. They are what he calls “price sensitive.” They expect a return on every dollar that they spend, and that means that they tend not to generate much income. He suggests actually increasing your prices to filter out these problem clients. When you do this, you can focus on the clients who are actually profitable.
Being profitable isn’t easy. It requires businesses to be cut-throat and sometime ruthless in their approach, at least at the beginning. Once your business has become more profitable, then you’re able to take more risks. But until you reach that point, your business needs to make the right decisions to stay in business.