If you are like millions of people, trying to make a profit running a small business, you know it is not easy to do, unless you know what you are doing. The problem with most small business owners is, they are just thinking about surviving. If you own a small business, don’t just think about this. You’re in business to be as successful as you can possibly be, and not to just make a living.
Here are 6 Ideas to make Your Small Business more Profitable.
Understand your cash flow
One of the biggest reasons that a small business is not as profitable as the owner wants it to be is the lack of understanding of cash flow.
At the end of each day, you need cash to pay the bills that are about to fall due. But why settle for this? Whatever cash you think you’ll need, try to surpass this by as much as possible. People who put a lot of emphasis on cash flow are usually the ones who run a seasonable business. They seem to believe that the excess cash, in the busy season, will make up for the slow times of the year. This is non-sense. If you run a business that’s a seasonal business, diversify, spread out and expand. I don’t like the idea of running a season business. When I think of running a business, I think of something that’s going to be busy, profitable and successful all year long. So, if you find yourself running a seasonal business, analyze it, and find a niche or niches that will be profitable all year..
Recommendation: Create a 12-month rolling forecast of revenue and expenses to help understand your cash needs.
Know your pressure points
When evaluating your business, there are a few big items that drive your business success. Do you know the top four drivers of your financial success or failure? Find out what they are, and focus on them. Then, your overall profitability will be easier to come by.
Recommendation: Look at last year’s results and identify the key financial drivers of your business. Do the same thing with your day-to-day operations. So this every day, focus on the most profitable drivers and put a lot of emphasis on them.
If you’re an affiliate marketer, or, if you sell products that are drop-shipped, you don’t have to be concerned with this.
On the other hand, if you handle the sales and shipment of products, you need a good inventory management system. This system does not have to be complicated. It just needs to help you keep control of your inventory. Don’t stock more inventory than you need, because this ties up your cash flow. Convert your present inventory into cash and you will increase profitability and eliminate a major cash flow problem.
Recommendation: Develop an inventory system with periodic counts to ensure you have no shortage issues. This will identify when you need to take action to liquidate old inventory. Liquidate it, turn it into cash, and keep doing the same thing, over and over again.
Know your customers
Who are your current customers? Are there enough of them? Where can you get more of them? How loyal are they? Are they happy? A few, large customers can either drive a business, or create tremendous risk of their going to a competitor. Don’t put all of your eggs in one basket. Do everything possible to keep your present customers by promoting customer satisfaction. Then, by your reputation, many small customers will follow, and this is the most important thing you want to run a very profitable small business.
Recommendation: Know who your target audience is and then cater your business toward them and what they are looking for in your offerings. Don’t be afraid to ask your customers to recommend you to other potential customers. You’ll be surprised at the number of customers who will do this for you.
What is your point of difference?
Once you know who your customer is (your target audience), understand why they buy your product or service. What makes you different from others selling a similar item? Find out what this difference is, expand on it, and make it even more different and better.
Don’t just settle on being different. Don’t even think about being the best. Think about being the best you can possibly be. Then, you WILL be the BEST.
Recommendation: If you don’t know what makes your business better than others, ask your key customers. They will tell you. Then take advantage of this information to generate new ideas, and new customers.
Happy with your support team?
Successful small business owners know they cannot do it all themselves. Do you have a good group of support professionals helping you? You need access to some of the best marketing minds possible. This is what people who run a profitable business do. Don’t try to do it alone. You don’t know everything, but you must know how, and where to find the answer to any question.
Recommendation: Conduct an annual review of your resources, be prepared to review your contacts and make improvements where necessary.