Skip to main content

How Can I Make This Year More Profitable?

By February 9, 2022Business, Cash Management

There is no fast track to business success. Sure, there are companies like Starbucks or Facebook that seemingly grew over night. But it took Starbucks 15 years to expand out of Seattle and about 9 years for Mark Zuckerberg to go public with Facebook. Overnight success stories are the exception, not the rule. And while I don’t have any miracles up my sleeve, I do have a few tips on how to make this year more profitable.

 

Plan

 

Planning is essential for any business to grow. Normally I would suggest that you start planning in December for the following year. We suggest scheduling a year-end planning session with your accountant every December to discuss your goals for the following year. But if you didn’t do one in December, then now would be the 2nd best time of year to plan.

The first thing you’ll want to do is see if you’re profitable on paper.

Some questions to ask yourself when setting up business revenue goals would be:

  • Are you offering any new services, and will those services be ready to sell?
  • What is the price for these new services?
  • How many members or clients would you need to make that service profitable?
  • Are you changing or canceling any services?

I would then figure out when these changes in revenue will take place and look at each month individually.

Are there any months that are usually a little slower or more profitable than others?

And then ask yourself how quickly you think these services will grow.

Planning this all out on paper will give you a good snapshot of this year’s potential growth.

 

Eliminate Tasks that Don’t Add Value

 

In other words, don’t offer a service that you’re not profitable on.

Like many young kids, my daughter and her friends set up a lemonade stand one summer. I took them to Target, and we bought ingredients for delicious fresh-squeezed lemonade, Red Solo cups, and some ice. They also thought it would be a good idea to make some brownies. All the other lemonade stands in town only offer the lemonade and they wanted to stand out. We went home, made the lemonade, baked some brownies, and made a large sign. Then I set them up on a corner with moderate traffic and wished them luck.

A few hours later they came back with large smiles on their sunburned faces and informed me their lemonade stand had been a success! They sold everything and made $20.

That’s great, I said. Here’s the Target receipt and you owe me $25.

Their smiles vanished.

We sat down together and wrote it out on paper.

  • How many cups of lemonade did we get when we divided the pitcher into the large Solo cups?
  • How many brownies do we get with one batch?
  • How many cups of lemonade, at what price, needs to be sold to make a profit?

The next day we bought some smaller cups and they offered the brownies and lemonade for $1 each, or both for $1.50.

Needless to say, this time they made a profit.

They had to adjust the amount of lemonade sold per customer and eliminate the free brownie service.

 

Run a Profit First Analysis

 

Another tip would be to run a Profit First Cash Flow Analysis.

Ask yourself how much money can you plan to take home using the essential 7 accounts from Profit First?

If you don’t know what those are you can buy the book here.

What’s your Owner’s Pay percentage? If you are not happy with that percentage, figure out where you can make adjustments.

Don’t assume that if your analysis doesn’t work out on paper that you will still magically make a profit by the end of the year.

In the “Lemonade Fiasco of 2014” no amount of miracle was going to produce more lemonade to fill more cups. We had to make it work on paper first, then make the necessary adjustments. Less lemonade = more cups. More cups plus the added value of the brownie = more profit.

If you make a plan, eliminate services that don’t make a profit, and run a Profit First cash flow analysis you will make this year more profitable. 

 

 

Follow us on…

Facebook

LinkedIn

Instagram

Twitter

YouTube

Leave a Reply