Raining, but your business dry?
✦ After years of hustling, late nights, challenges and innovation, many business owners find themselves in the situation where their enterprise looks profitable, and yet doesn’t feel as financially successful as it should.
Sponsored article from Liz Jarvis, Better Business Decisions
We can all admit to not paying ourselves enough when we reach this point, relegating ourselves to a minimum wage bracket or ‘what’s left over’ even though we occupy the CEO position in our own business.
So how do we begin the detective work to find where all our profits are hiding, so we can start to see move ‘leftovers’ at the end of every month? Or even better, give ourselves a well-earned pay rise?
Check the facts on your costs
When we’re caught up in the daily doing of our businesses, we can sometimes miss small details that can have a big impact on our bottom line. So now might be a great time to review your figures on what it takes to do your ‘thang’ in business, right from the start, and how they play into your final profit margin:
Has the price of your base materials increased recently?
Has the cost of freight gone up?
Are you missing a tax or fee along the way that should really be attributed to being a cost of production?
Have you invested in new software, hardware or services that should really be factored into your cost of goods?
You might be surprised at how long it’s been since you reviewed this aspect of your numbers, particularly if you’ve just reached the other side of a surge in growth. This likely saw you bring on team members, upgrade your website, maybe put another vehicle on the road or level-up your tech.
All of these are costs in the doing of business, so make sure your expenses and margins on your finished product are accurate.
Have you outgrown your current levels of use?
Many of the software and services we use in business today have tiered pricing structures, ones that reward bigger players with lower per unit rates. This could be anything from your accounting software, inventory, shipping, communications and marketing platforms.
Spend some time - or perhaps get some key team members to give you some feedback - on your current use of these products and programs versus their current pricing offerings. These providers will offer different packages and more competitive pricing as time goes on and more competitors enter their markets. So reviewing the companies you’re investing in to ensure you’re getting maximum value can be another great place to dig for untapped profits.
Are factory settings giving you an unclear snapshot of your business?
This is one of my favourite tech / financial cross-over topics, and my go-to way to give new clients a massive download of clarity.
When it comes to the software we use to track and report on our numbers - think MYOB, Xero, Quickbooks - these often come with a series of default categories we can sort our incomings and outgoings into. This is so they can appeal to as broad a market as possible, but the trade off is that these categories (your ‘Chart of Accounts’ in fancy pants lingo) won’t often accurately reflect your business right out of the box.
The secret: get super detailed on how you manage the categories in your chart of accounts for some next-level insights into your business.
Not blown away yet? Walk this way.
Think of your marketing expenses as an example. Most of us will write off Google ads, Facebook Ads, social media content, email marketing, printing and more to a standardised ‘Advertising’ account. But imagine if you took the time to create an account for each of these expenses?
Then, you could put your detective hat on, jump into the backend of your website and review where most of your traffic is coming from, and more so, the traffic that leads to a transaction. You might be under the impression that Google Ads are doing all the heavy lifting, when really most of your customers are clicking and converting off your weekly specials email, with a little help from Facebook retargeting.
This would then allow you to shift your marketing investments around, or even save money with a clearer idea of:
Where you’re actually spending your money and
What’s actually more likely to trigger a sale.
The added benefit of going all Marie Kondo on your data management is when it comes time to bring someone else into the loop. Like when you’re working with a lender for a loan.
We all know how much banks love lending money to small businesses (*snort*) BUT imagine the difference walking into the bank with reports you’ve generated that get super specific on:
Your exact revenue streams - training, group coaching, platinum package - which showcases exactly what you do to the bank rep (rather than just ‘Sales’)
Your exact expenses - transport, support material, premium packaging - all of which can clearly be measured against the income streams they support (rather than just ‘Cost of Goods’)
The bank teller can’t understand the business of every applicant they see, so make it easy for them to see the strength of your operation with detailed reports than offer a crystal clear snapshot to the most casual observer. This level of detail may also allow you to level up the conversations you have with your accountant, as they too can better understand your operations on paper.
Time to get your detective hat on
If you’re eager to dive in and discover some hidden gems in your numbers - but you’re not sure where to start - this is a process I love walking my business clients through. Head over to my website and book a FREE 30 minute chat with me, and we can develop a game plan for profit hunting in your business.
Disclaimer: These are yuck and boring but unfortunately a legal requirement for professionals in my industry. So just a reminder, the information contained here is general in nature and you should seek financial and business advice tailored to your own personal circumstances. Which, by no small coincidence, I can help you out with. Head over to my website and book a free 30 minute chat with me: https://betterbusinessdecisions.com.au/
Liz Jarvis BEc CA
Youtube Channel: https://www.youtube.com/channel/UCd_7znD53DbzVfmLoFPVZWQ
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