Profit is one of the most powerful measurements in your business. It's just your sales minus your costs, and is essentially the money you're left with after you finish paying the cost of doing business.
It's not uncommon for small businesses to lose money and never see a profit until the day they decide to finally close up shop and call it quits. Then there are businesses that are profiting, but definitely have room to increase their profits, stay in business for the long term, and change not only the lives of the owners, but the employees and people who the business impacts.
In the last blog post, we talked about how profit is much more impressive than sales, how to calculate your profit (or loss), and 3 tips to keep it simple. If you missed that one, it's a good idea to go back and start there.
In this post we're going to be taking it a step further and using the information your profit and loss shows you to increase profits in 3 ways.
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It really is worth going back and reading the whole post on How to Track Your Profits Simply, but I know you're busy, so here's the rundown.
Profit is what you're left with after you pay for all the costs of doing business. It's simple. Sales - costs = profit. If your costs are greater than your sales, then you're operating with a loss instead.
I offer three tips to tracking your profits simply:
Now that we've got that out of the way, we can focus on the fun stuff - increasing profits!
The easiest way to increase profits is to increase your sales by raising your prices. Depending on your business, this may be a bit capped due to a lot of competition. If you provide a service and work closely with your customers or clients, this may be easier than you think.
As my bookkeeping business has grown, I have raised prices on existing clients. The longer I'm in business, the more valuable I am, and my prices have to change accordingly as well as adjust for inflation.
I find in my business that a good time to revisit this is the beginning of a new year, and I have had very little objection. In doing this over and over, I've found that more often than not, I'm undervaluing my service and I believe this to be true for most entrepreneurs.
Make sure that your prices reflect the value you provide your clients and customers, and not the limitations that you've put on what your hourly rate is. I don't bill my clients by the hour, I bill them by the job, and it really shouldn't matter how quickly I can perform a task as long as I am relieving burden to my clients and providing them with value.
If you want to increase your costs, you can also find a way to increase your value and use a positive spin to your existing customers on how they can receive a new exciting offer, at a higher price of course.
Another way to increase profit is by increasing sales through selling more offers or adding new offers, or by doing both!
One of my favorite ways to sell more offers is to drive more traffic to my site using Pinterest. If you haven't checked this out for your business, you really should. It works across all types of businesses and can bring you business for free!
If you offer one-on-one services, you may be able to add on more clients by hiring help and outsourcing some of your work to people who you pay less than what you charge your customers. I finally took that leap in my business last year after holding on to too much control for way too long.
I was previously unable to add new clients because my time was capped, but once I hired, I was able to pass on so much work, keep the difference, and grow my client base. If you're struggling with control like I was, I implore you to let go of it and find ways to free up busy work, give someone else an employment opportunity, and take on more clients to grow and scale your business.
The third way to increase profit is to cut costs. This way your sales are going further. I prefer to go the route of increasing sales, but cutting costs has a place too, especially depending on what stage of your business you're in.
I find tracking your profits monthly to be insanely helpful with this because you'll be able to see at a glance what your costs are by category, then dive deeper into what you're actually buying within that category.
In my online business, I find that small dollar items add up and might be more of a luxury than a necessity.
One example of this for me is Canva for work. While the features of the paid version are nice and save a bit of time, there are workarounds for sure that allow me to use the free version.
If you're seeing that your $10 monthly charges for a hint of convenience are adding up and that their cost exceeds their value, you'll know it's time to cut those services and go back to the free version until you see a change in your sales with one of the two methods above.
You may also notice when looking that you're paying totally avoidable costs like paper statement fees with your bank, or you're paying for software you don't actually use. This happened to me with an Adobe product and it would've charged me $29.99 a month had I not caught it immediately.
Tracking your profits gives you a snapshot view of how your business is actually doing and allows you to clearly see your sales and costs by category.
You can use these numbers to make adjustments to increase your profits by either increasing sales or cutting costs.
You can increase sales by either raising prices or selling more volume. Add value to your clients to raise prices without objection, don't sell yourself short, outsource in your business to bring on more clients, use Pinterest to bring more traffic, and cut costs that don't provide you enough value.
These slight adjustments will make a big difference in your bottom line and in running a business that can stay around long term and allow you to live the life you dream of, are capable of, and deserve.
Be sure to stay in touch and check out my free resources. The best place to start is by getting your Free Starting a Biz Checklist to make sure your business is set up right and you haven't missed a step that could cost you a lot of money or potentially cripple your business.