Complex formulas abound on the topic of profitability and your small business. The simple truth is there are really only 2 ways you can increase your profits.
(or a combination of the two for a super-duper sundae with cherry on top!)
You were expecting rocket science?
Let’s break it down in simple accounting 101 (I promise, no scary math).
Top line income = the revenue you bring in from all sources (different service offerings, programs, affiliate income, etc.)
Bottom line income (aka profit) = top line revenue – expenses
Expenses = all the cash outflows you make in order to operate your business (everything from investing in a mentor to office expenses and beyond)
Let’s put some numbers out there to illustrate the point.
If you earned $75,000 in your business and had $50,000 in expenses, your bottom line income or profit would be $25,000.
The only ways you can turn that $25,000 into something greater (say doubling it to $50,000) is to
- earn $100,000 and keep expenses flat at $50,000 (resulting in $50,000 profit)
- earn $75,000 and cut expenses in half to $25,000 (resulting in a $50,000 profit)
- some combination of the two
Where I see so many business owners run off the rails into a pit of despair is when they get so focused on top line revenue that they will do anything and spend anything to get it.
Inevitably it is one hell of an adrenaline rush.
However, at some point an accountant or business mentor will actually look at their numbers and point out that despite their best efforts they are actually less profitable than they were before! That is the ultimate buzzkill.
There are many strategies out there for putting profit first and budgeting. Yet no matter how you slice it, it comes back to these fundamentals.
Where to Start
First, the inner awareness.
If you are not already looking at your numbers and thinking like a CEO regularly, what is getting in the way?
Are you afraid of what you’ll find?
Still using the excuse that you are “not a numbers person” to avoid things entirely? (Remember there are “numbers people” that can help you in a way that melds with your mind.)
Next the practical action.
- Look at your numbers! Tax time is coming up so tag team this action with that.
- Where did your income come from last year (get specific)?
- Where did your money go (get specific)?
- What was your profit?
- Now ask yourself:
- What needs to change for you to increase your profit?
- Put profit top of mind every day by using Your Daily Profit Planner from the Profit PLUS system.
What to Do Next
Once you have the basic information gathered, you might find yourself knowing that you need to do something, but not sure what to do or how to do it. That’s where a 30 minute profit boost session can really help you increase your profits. Claim yours here.