6 Strategies to Make a Profit in Your Business
Summary: Do you want to know the secrets and strategies 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, investing in your team or technology is hard. 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 will 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 to small teams and even large companies! We'll show you six strategies to help your business make more profit while giving you back time and 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.”
As you probably know, profitability 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 6 Strategies to Make a Profit in Your Business.
The Common Battle With Profitability
Many business owners struggle with profitability and are looking for strategies to make a profit. A major reason for this is that profitability is treated as a reward and not as an intention.
We come into small business ownership seeking freedom with a desire to create our own story.
This freedom and prosperity is the first thing that is often traded.
Because your business means so much, it is easy to hop in the trenches to hustle and grind to get work done. It 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.
But this isn’t the only thing to look at to make your business more profitable. There are other things to look at as well.
2. Find the right price.
This is one of the parts of business that scares so many entrepreneurs. It is a mindset problem that I see so often. Should you raise your prices?
Raising your price feels sensitive, right? Everyone feels that people don’t want to pay more.
The question should be ones like the following: "How can we make it simple to pay more? How can we make it so easy that people want to pay more?"
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 increases. Embrace them.
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.
There is other work that could be done that is profitable. Spending more time on one project takes time away from getting the other work done.
Scope creep happens when more tasks are added. That increases 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 business owners 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.
The longer it takes for something to happen, the less profitable that project likely becomes. This is what I call time slippage.
In business, time slippage can happen for a multitude of reasons. Most of them have to do with focus and distraction. A notification pops up, a question gets asked, or your mind simply is on a billion different things, and you don't accomplish any of them.
Here’s a common example: You know you really need to get back to a client, and you start to respond, but you are so busy that you get distracted finishing.
By the time you finally get around to finishing, it has taken you three days. Your attention wasn’t fully invested in it, so you continually played ‘stop and go’ and had to rethink what you were doing each time. If you had instead just focused on the task, you probably could have finished it rather quickly.
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.
Product Mix is having a mixture of different products and keeping them in the right proportion. It is comparing what is most profitable to what is least profitable. It is looking for services that help and might lead to more services. It's looking at how to correctly proportion your time to create the best outcome.
Another thing to look at is the range of items you sell. You want to have lower-priced and higher-priced items.
It is truly easy for people to always sell the least profitable item in their service toolkit. Which is great. But you want to make sure that you are spending your time proportionally.
To help you out, I'll share what this looks like for us in our business:
One of the services that we offer is a business audit. This is where we go in and look at all of the strategies I have listed in this article to find profitability and create opportunities to have a better business. Once I have done that, I have a clear vision of where the business can grow and scale. It brings me clarity on how I can help them out. I can share my findings and hopefully work with them longer to benefit us both.
If you know where the client needs to go next, you both get to win. You can help your client do better, and you can get more than one sale off of the client.
However, 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.
Once you have tracked the numbers, you may find 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 higher profits proportionally.
on 6 Strategies to Make a Profit in Your Business
Making a profit in your business doesn’t need to be hard or scary.
Remember that entrepreneurship takes confidence and bravery. Using these six strategies will help you have both.
All of these strategies will help get your cash flowing again. I use them with my clients.
Gaining more cash flow will help you invest in bigger growth so that you can do all of those things that you need to do OR want 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.