As a business owner, you sometimes discover that even though you think you’re doing everything you should, you’re just not making the kind of profit you thought you would. This is not that uncommon and there are things you can check to improve your profit with just a few tweaks.
Know Your Gross Profit Margin
The first thing you should always know at the drop of a hat is what your basic gross profit margin is and then how that compares to the industry average. The formula to figure out your profit margin is calculated as follows:
Profit Margin = Net Income / Net Sales.
Once you figure that out, you can check it with industry standards.
Dig Deeper and Review All Your Prices
It’s also important to look at the prices of your products or services together and individually. Look at whether you’re making a profit off every single product or service you offer. If the profit is lower on certain items than others, or even at a loss, note that so that you can fix this problem later.
Increase Your Prices
It’s very important as a small business owner that you learn that you should not compete on price. It’s also important that you stop offering discounts without a strategic means to increase profit. For example, it’s okay to offer two or three price points with different value points, but don’t just blindly give someone a discount without a plan.
Analyze Your Expenses
Sometimes expenses can get out of control in any type of business. Take a look at each expense and determine whether or not you really need it. For example, are you paying for a project management solution but you’re not using it? Even five or ten dollars can add up over time and really cut into profits.
Test Your Advertising and Marketing
Often, the biggest problem with profits is poor (or lack of) advertising and marketing. Remember that advertising is paid, such as running a Facebook advertisement; marketing is something you do organically, such as content marketing.
Push Sales Harder
Once you realize what’s going wrong, you can push sales harder by making better sales pages, running more advertisements, focusing on content marketing more and so forth. If you’re not asking for the sale, you’re not going to get the sale.
Redesign Your Website
If it’s been a while since you looked at your website objectively, you may want to check it out. Sometimes changing just one thing such as a drop-down menu or pop-under or slide can make a huge difference in sales.
Rein in Time Suckers
This is something that can get in the way of profits for many types of businesses. Likely online service-based businesses more than others, but if you’re spending a lot of time on social media without a plan, you are eating into your profits. Set a time limit and only use social media when you’re done with your paid work.
If your business isn’t profiting as it should, even though you have good sales and are working hard, checking these things and tweaking them can make a big difference. It will just take a little extra effort to ensure that everything is working well together.
Test Your Next Business Idea Before You Waste a Lot of Time
In order to test a business idea so that you don’t waste money and time bringing something no one wants to market, you need to make sure that there are enough people who will buy it, and then you’ll need to make sure they’ll buy it from you. Fortunately, you can do the research on your idea without spending much time or money.
Look At Your Competition
If someone else is highly successful selling what you want to sell, you can also be successful. Take a look at all their offerings, how they offer it, and start following their audience too.
Start Building an Email List
Don’t wait on building an email list. You can build it via surveys, offering a wait list, giving away a freebie, and other means. Don’t be afraid to collect information while you’re deciding.
Check Out Google Trends
With Google Trends you can look up almost anything to find out what the interest is online. If you want to sell vegan vitamin B12 supplements, for example, you can find out how popular they are.
Find Out Market Size
You can validate demand by learning what the market size is. What’s cool is you can use Facebook’s advertising platform to learn more about your audience, including how many of them exist. For example, you can find out if there are enough 28-year-old moms of twins that need your product.
Develop a Landing Page
Even if you don’t have anything to sell yet, you can create a website and landing page that collects information and email addresses on people who are interested in that type of product anyway. Just give away a free information sheet or checklist or something like that to get people thinking about the product.
List It For Sale
Even if you don’t have the product yet, you can test market desire by listing it for sale without a way to pay. You can do this via listing sites like Craigslist, or you can do it via your landing page. Put them on a waiting list for the product, and you’ll have immediate sales if you decide to go forward.
Ask People to Pay in Advance
If you can get enough orders before you even have the product to justify starting the business, then why not? People use this idea very successfully when they use crowdfunding, or pre-orders for books and other merchandise. Don’t spend any money, because if you don’t move forward you’ll have to refund.
Focus on Solutions Not Problems
When you can come up with an idea that is something people already want, you usually can be sure that you have a winner. But, there is more to it than that, such as ensuring enough people want it to support your business, and whether or not you have the skills to see it through.
Doing this research in advance is imperative if you want to be successful in business. Taking any product or service to market before you have done your research is a waste of time and money. Be sure that someone wants it and that you can deliver it before you get too excited, and you’ll be glad you did.
How to Prepare Your Business for Future Growth
Believe it or not, growing a business takes more thought than just making more sales. You could end up in a bad situation where you’re making more sales than your business can support. It can cause a serious problem with trust from the consumer, and can actually totally ruin your entire business. Better to be ready for future growth.
Create Standard Operating Procedures
Every single business from a fast food restaurant to a service provider can improve their business by creating standard operating procedures. When you have procedures in place that are repeatable, you’ll experience smoother growing pains and even encourage growth.
Save Money for Higher Expenses
When your business grows, expenses go up. Whether it’s marketing and advertising, materials, costs for contractors and so forth, you’ll spend a little more on expenses. But, if you’re ready for the higher costs (which can sometimes kick in prior to experiencing the revenue), it’ll go smoother.
Set Up the Right Software
There are numerous types of cloud-based software that you’re going to need in your business. Whether it’s shopping cart software or a website, you need to ensure that what you’ve chosen is scalable. You don’t want to pay for more than you use, and you want to make sure it scales easily.
Use Automation Carefully
Today you can automate so much, from social media to even accounting. But, it’s important to choose which things should be automated and which should not. Generally anything to do with engagement should not be automated, and anything that keeps you from having to do data entry should be.
Put an Accounting System in Place
If you’re currently doing your accounting by hand and you want to grow, it’s going to be best to create an accounting system that is automated and done by a professional. You can do this with many programs, from Go Daddy Bookkeeping to QuickBooks to Quicken.
Identify Holes in Skills
Sometimes when you want to expand there is a problem when it comes to skills. For example, if you have a service-based business such as a website building business, you’re going to have to hire people like yourself in order to scale up.
Improve Social Media Accounts
As you seek growth, focus more on your social media accounts. Upgrade them, ensure there is a branding match across networks, and then hire someone to keep your accounts up to date and create a social media marketing strategy.
Make Contact with Appropriate Contractors
You’re going to have to hire contractors or employees as you ramp up your business and plan for future growth. It depends on the type of business you have, but if you make contact now and get to know people now, you’ll be ready.
If you’re not ready for growth, you can actually end up losing your business. The reason is that you could end up making promises you can’t keep, or having to turn away people due to lack of supply. This can be really hard to take. But, if you prepare in advance you’ll be ready for future business growth.