Do you feel like you’re always running out of money? Do you feel like it doesn’t matter what you do and how much revenue you generate, you never really turn a profit?
I know how you feel. I went through the same thing with my business when we started out. You cannot believe that after the project you just finished you still are running behind payments and you just think that you need another project.
It always feels like the profit is just around the corner and yet the corner is always out of reach when you come close.
I’m here to give you 5 tips to turn your business profitable right now.
Cut costs meticulously
I understand if you have been let down by the subtitle here. You think, “Of course, if I cut costs I will have less of an overhead and therefore more money that’s left”. I agree. So why not do it?
When you started the business, you did not have any overhead whatsoever and then you might the first sell. And then another one. Then you had a big project which required some help. Additionally, you needed a new car to get to your clients.
I get it. Been there, done that.
But the problem is, that usually costs stay even after you’ve hit a slump. Even after revenue dries up you still have the extra help and the car, and the subscription for a service that you technically don’t need.
So, be meticulous and go over every expense from the past 12 months and decide whether that expense makes your business grow. Is that expense necessary to your business operations?
If you can cut it without doing any harm whatsoever to your business, then it’s gone. Cancel the subscription. Sell the car. Do whatever it takes to get this thing off the financial statement.
Should you however decide that the expense is absolutely essential to your current operations then, and only then, you should keep it. But, and that’s important, try to get the current vendor or service contractor to reduce the price. You can do so by making sure that you pay your bills on time and having a good relationship in general with them.
Maybe they say no, but that’s about the worst that can happen. Best case scenario: You get a lower price and thus reduce your costs.
Move income out of sight
What do I mean by that? For every dollar that you generate in revenue there are certain amounts that will be used for taxes, salaries, and other expenses.
You need to get multiple accounts with your bank and move the money into those accounts right when it’s coming in.
So, here’s an example. You receive a payment of $1000 from a client. You have the following accounts set-up: Taxes, Payroll, Expenses, Profit. What you do now, is you move the defined percentage of that $1000 into those accounts.
You take the previous 12 months and should be able to calculate exactly how many percent of the revenue has to go into your taxes, your payroll, and your expenses account. Additionally, you should start by moving 1-5% to your profit account.
Yes, you read that right. You need to move the profit before you use it again. You can go as high as you like with that, but you have to be realistic here. If you are going through a dried period, you shouldn’t move more than 5% of your income.
There is a lot to this technique. (To learn more about it, check out Profit First by Mike Michalowicz)
Spare time? Sell.
If you are bored, because business is slow, then maybe you need to go out there and sell the hell out of your product or service.
Yeah, why not, right? I mean you are a sales machine, are you not?
If not, then maybe it’s time to learn some simple sales techniques and grow as a person. Get a new book on marketing and sales. Learn something new that puts your business ahead.
Remove debt from the equation
Maybe I should have started with that, but then again, the other tips are just as important.
If you haven’t read my blog before you’ve started your business and did in fact borrow money to do so, or are in debt because of another reason, then you need to get rid of that burden asap.
Unless it is good debt, which I am not going into detail here explaining what that is exactly, you should pay it down.
Assign a certain amount from your income that goes towards reducing your debt.
First, it will reduce overhead as you’re going to have lower interest payments.
Secondly, it will lighten the balance sheet, which is a good thing.
Thirdly, it will be a huge weight off your shoulders when that debt is gone.
If you take away only one thing from this post, please let it be that. Get rid of your debt.
If you generate a nice revenue, but your per client income is quite low, then maybe you want to think about upselling.
I’m sure you have heard the term. And upsell is when someone wants to buy something from you, and you can convince them to take the higher priced item.
And that’s just one example of an upsell. There are many variations you can choose from, but that might generate a bit more income that is needed to push you into being profitable.
If you follow the other tips and generate more revenue through upsells, you will be left with a multiple of profit that you could have never dreamed of.
Not matter what you do, just make sure that it is in line with where you want your business to go. I want you to reach profitability as soon as possible and by that, I mean having some cash left in the bank. Because having a profit in your financial statement does not equal having money.
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