How’s your business going? If you were asked this question would you know at any moment whether profits are up or down? Would you know by what percentage or by what amount your profits have increased or decreased? Why should you care to know these answers?
Because not knowing is costing you time and money. Why spend all year chasing business that’s actually costing your more than it’s helping your bottom line?
If you don’t know, you’re not alone. The harsh truth however is you should know. Why most entrepreneurs don’t know is that they aren’t working on the business regularly to do the critical small business planning. The good news is these steps are not things you have to do every week or month. You can do these steps just once a year, but make sure you refer to the plan throughout the year.
Here are 4 steps every small business owner should do to increase profits.
Step #1. Evaluate your true profit margins
When it comes to small business planning job costing is not something that most small business owners do, though it is very important part of the planning. As a result, they do not know how much a specific job is contributing to the profit margins.
If you are not doing so already, now would be a good time to start. Create a process for your business, to determine what jobs are contributing to your profits and to what extent. You can report this on a book keeping program such as QuickBooks or other popular programs like PeachTree.
Based on the information you are now able to decide if you have to adjust your business model, change your proposal or whether you need to change the project management approach to bring in higher profits.
Step #2: Evaluate and profile your best clients
Another aspect that must be included in every small business planning effort is to know exactly who your best clients are. You should execute this step after you identify your profit margins. Your best clients should represent not just who you enjoy the most, but your most profitable clients. Take the jobs that are contributing to your profits the most and identify the clients who gave you that job.
Next, create a more detailed profile for these clients. There may be a few names on the list.
a. Find out how the client heard about you.
b. Why did the client hire you over others?
c. What work does the client do?
d. Are they buying anything else?
You can even probe a bit deeper and find answers to questions such as:
a. What type of car does the client drive?
b. How do they spend their leisure time?
c. What age group do they belong to?
d. What are the things they value?
e. What are the motivators that drive them?
Step #3: Eliminate redundancies and inefficiencies to increase profits
Keep reevaluating how you can make your company more streamlined. What suppliers and vendors can you swap to get a better deal? This step can save your company significant money, but it should be delegated to an entry level staff member, not done by you, the small business owner.
How can you divide work more efficiently? Perhaps your have one person responsible for 3 areas, but it takes that person twice as long for one of those areas than another staff member on your team. If you do not have a process right now for measuring this you will never have a way of knowing what tasks are bloating your costs, so set up a process so you can measure this.
What new technology tools could you adopt that would slash your manual labor costs?
Step #4. Have a well-thought out detailed marketing plan
Your small business planning must also include well defined marketing strategy that will help you increase profits. Marketing has witnessed a lot of changes in recent years and has brought with it misconception, frustration and confusion. A business can engage in hundreds of different marketing tactics, but in order to truly sustain the effort, small business owners need to hone in and choose your top 3-8 tactics to focus on.
Choose marketing tactics that your target market responds to the most. For example, if you are a company that sells sales training to C-level executives working in mid size or enterprise companies,
It is highly unlikely that your target market will be looking for sales training companies on Facebook, Pinterest or Yelp. But it would be a good idea to channel your energies on LinkedIn and to engage through conferences and webinars. Your marketing strategies should also consider your annual budget for marketing and how much time you have to spend implementing the plan every week.
After you decide on a strategy, it is time for training. Training will help you understand how to leverage your strategy and maximize results. In this way, you can avoid trial and error, which can be a costly proposition.
The journey to increasing profits in your business does require you to pull yourself away from working “in the business” so you can “work on the business.” Small business planning is a critical piece that needs to land on your calendar on a regular basis.
Be sure to incorporate these 4 steps during your next small business planning session. However, if you aren’t stopping to plan your business growth because you’re too busy from wearing all the hats, juggling too many tasks, you need to call for professional help. I can help you turnkey your business, following the same best practices I used to turnkey and sell 3 of my own companies over the past 20 years.
If you would like to discuss how we can work together to help you take your business to the next level, I invite you to contact me for a complimentary discovery session. You can reach me at (215) 292-4947 or email me direct at [email protected]
PLUS, be sure to share your comments below. I would love to hear your best small business planning tip that helped you increase profits in your business.
Here’s to your small business planning success!
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Go ahead! As long as you give full author attribution as follows:Business Growth Expert Yoon Cannon has helped thousands of CEOs, entrepreneurs & small business owners achieve dramatic results in sales, productivity and profits. Over the past 20 years, Yoon has started 4 other companies and sold 3 of them. She is the author of numerous articles published in major print media and magazines. She is also a popular keynote speaker. Get Yoon’s free video “How to Find Your WOW Factor” at http://www.ParamountBusinessCoach.com. Call Yoon direct at (215) 292-4947.
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