Think back to when you first started your small business. Whether it was five months ago or five years, did your decision to own a business come from your love of doing the actual work? I bet that’s the case, even if you delegate some or all of that work today.
New agencies are often started by marketing and advertising professionals with the expertise and guts to break away from the place where they worked long hours and for not a lot of money (though the free beer was nice).
Photographers who start out solo often find that when they can’t keep up with the demands of their growing business and too many weekend gigs, they have to bring on someone to help with production, scheduling or other support work.
We love working with small businesses and, especially, with people who still have a true passion for what they do. We feel their excitement most every time we talk with them — except, maybe, when it comes to tax time — and admire their craftsmanship and contributions. (We may be bookkeepers, but we always recognize and respect creativity!)
One thing we also see: People with a passion for the work they do don’t always have the business acumen that’s needed to run a successful, profitable and in-it-for-the-long-haul business.
We love working with small businesses and, especially, with people who still have a true passion for what they do.
Passion vs. Profit
Over time, passion for your business will fade … or at least, ebb and flow. (It happens to me, occasionally, truth be told.) Sometimes what dampens the affection is dealing with the demands of a growing business (or demanding customers). Other times, it’s a feeling that the beloved small business is actually an unprofitable one. And that doesn’t feel great.
We love working with small businesses and, especially, with people who still have a true passion for what they do. I’ve met business owners who think profit is how much money is in their business checking account on a given day and others who go with their gut. (“I feel profitable, so I probably am … um, I think.”)
Over the years, I’ve also spoken with small business owners who know for certain they’re not profitable. I’ve had some tough and sometimes teary conversations with them about the situation their business is in.
Though I consider myself a good listener, I’m always on the edge of my seat and ready to share thoughts on how a business owner can start to turn things around.
Walk, don’t run to a quiet place and review every expense over a period of time — say, 3-5 years, if your business has been around that long.
Path to Profitability
If your small business is struggling to make a profit, here’s profit-protecting and profit-building advice from a person who has spent a gazillion hours reviewing what companies earn and spend.
Know — truly know — every dollar your business gives up. If you already know this, I tip my bookkeeper’s hat to you. But perhaps you’ve been turning a blind eye to money that goes out your business’ door, because someone other than you is overseeing the books. Or maybe you’re involved, but expense-tracking gets short shrift.
Walk, don’t run to a quiet place and review every expense over a period of time — say, 3-5 years, if your business has been around that long. Identify areas where expenses increased and decreased and determine the drivers. Make a note of what expenses can be lowered, which could result in more profit. Then start realizing those savings.
If you’re spending more time thinking about the future instead of the here and now, it could be time to shift your focus.
Curtail the (often, all-consuming) business-growth plans. Are you excitedly dreaming about what comes next for your business? Maybe your thoughts are about growing your team or moving into a larger space. It can be heady stuff to think about, for sure.
But if you’re spending more time thinking about the future instead of the here and now, it could be time to shift your focus. Is your business truly ready to take a big leap? Are you? Is your team?
Growing too quickly often harms cash flow. Plus, extra cash can mean extra profit for you and any business partners you have — and even for your team. (A profit-sharing plan. Yep, it’s a thing.)
Spend time imagining what could happen if you don’t add staff or lease a new location. Think about what the extra money (profit) could mean to you. Have you been putting off paying yourself a fair salary all these years? Is there some equipment or training that would mean the world to your team? Or maybe you just need to regularly have more money at the end of the month.
Consider this: Not growing your business is worthy of dreaming about, too, friend.
If you have a team, bring everyone together to tell them you’re interested in collectively doing a better job of managing and cutting expenses, yourself included.
Talk about expense-cutting and increasing profit with everyone you know. Everyone connected to your business, that is. Strangers might give you a funny look!
If you have a team, bring everyone together to tell them you’re interested in collectively doing a better job of managing and cutting expenses, yourself included. Ask for their input on areas where costs can be lowered. You might be surprised at their creativity and insight.
If you don’t have a team, talk with vendors, strategic partners and even people in your networking group. Share some of the things you believe you’re paying too much for and ask for advice on less-expensive options.
And don’t make the mistake of this just being a one-time discussion. Incorporate the topic into your annual planning process, of course, but focus on it throughout the year, as well.
Set a modest goal of reducing expenses by just 2% over the next month.
Building profit benefits from small, shrewd steps. Sure, you can give a boost to profitability by making a big, bold move — for example, by cutting staff or adding new services or products. But some of the most effective efforts I’ve witnessed are when small business owners take seemingly small actions to spend less money each month.
If you’re up for the challenge, set a modest goal of reducing expenses by just 2% over the next month. Get your team involved and make a game out of it by encouraging their efforts to cut costs, too. (Hint: Treat them to something nice for their efforts.) Or ask a vendor for a long-time customer discount or a contract renegotiation that could shave dollars off an expense when it’s paid annually instead of monthly.
Small efforts to become more profitable will add up over time, I promise.
Have you had to pay money to fix a financial mistake, like taking out a high-interest loan or maxing out your credit cards?
Consider hiring a trained pro to help you with the financial aspects of your business. This could be a bookkeeper, like yours truly, or a CPA to help you with taxes or business-growth planning.
Asking for help can be hard for small business owners, especially if money is tight. But if you’re postponing a financial decision that’s causing you angst and costing money (detracting from profit), those dollars might might be better spent.
While it could be hard to place a dollar value on what “not going pro” is costing you, you could start by figuring the cost (both hard and soft dollars) of going it alone. Have you had to pay money to fix a financial mistake, like taking out a high-interest loan or maxing out your credit cards for a quick cash infusion for your small business?
These experiences aren’t enjoyable to look back on, but you might see profit-draining patterns that shouldn’t be repeated.
Profit First: It’s a book, a cash-management philosophy and a way of life for business owners who want to start becoming more profitable.
Start realizing more profit by paying yourself first. I happen to know a proven system for ensuring and measuring profitability. Perhaps you’ve heard me talk about it or you read my profit-growing thoughts here on the Moxie blog.
I’m talking about Profit First. It’s a book, a cash-management philosophy and a way of life for business owners who want to start becoming more profitable.
Adopting the Profit First mindset includes making profit a priority, so much so that you begin deducting a pre-determined profit margin upfront — even if you’re not sure you can afford it.
It could be 1%, $100 or $1,000 dollars a month. It’s not the amount of money as much as it is the focused effort you put forth.
It requires you to rethink the old formula Sales – Expenses = Profit. (Because, after all, if we have money, we often spend it, and profits don’t materialize.)
When you shift the paradigm to the Profit First formula of Sales – Profit = Expenses, you’re focused on making profit a hot priority instead of it being a cold leftover!
Make your move to become more profitable!
How to Become a More Profitable Small Business: It’s Your Move
If becoming more profitable has appeal, I’ve rounded up some great resources for you. Some are free and some aren’t, but I bet you’ll find at least one thing to inspire you to begin thinking about making profit a priority for your business:
- Read my Why I’m All About Putting Profit First article.
- Download this Profit First Overview PDF.
- Watch this business success story on YouTube. (You’ll find others online, too.)
- Read the first two chapters of Profit First for free, or buy the book.
- Check out my new Profit First for Creatives community.
If you want to take a bigger step toward having a profitability mindset:
- Look into my Profit First Basics digital course. (It’s free if you’re a regular client of Moxie’s.)
- Schedule a complimentary call with me, where we’ll talk more about putting profit first.
- Choose one of our Profit First support packages, like what we affectionately call the Single Scoop: a one-time, complete assessment where we help you determine the amount of profit to carve out and set you up with a plan to make it happen.
Becoming more profitable is within most business owners’ reach. If you’re tired of fighting what feels like a losing battle, trust me when I tell you help is out there. What’s the first step you’ll take to become a more profitable small business?