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4 ways to have a profitable business

4 ways to have a profitable business

For your business to be profitable it must be financially resilient and flexible in our modern fast-paced, ever-changing, world. Financial resilience and flexibility can mean many things, but for you to have a profitable business it means 4 very important things. 

 

 

Summary: 

 

1. Pay attention to your sales, expenses and profit margins

2. Look around your environment – don’t shrug it all off

3. Future proofing: Stepping away from “If it isn’t broke, don’t fix it”

4. Avoid oversells: Get your hands dirty instead!

 

 

1. Pay attention to your sales, expenses and profit margins

 

The easiest way to have a profitable business, as well as financial resilient and flexible, is to review your accounts and finances regularly. When looking at expenses, you must question whether you’re getting a return (ie. you’re getting something of value from it). When assessing cashflow, brainstorm how you can generate more revenue. When quoting for projects, query your profit margins – are they enough? Sadly, these tasks often get neglected, along with budgeting, but if you really want to have a profitable business, then you need to explore how you can turn this chore into an enjoyable task.

 

The good news is, with the rise of cloud accounting software*, the bookkeeping work required before you can even get on to this job is far easier and quicker to do than ever before. You can download the app to your phone and whilst your coffee is brewing, you can get an overview of your accounts. Then, whilst enjoying your coffee, you can contemplate the above questions.  

 

Interestingly though, whilst there really is no excuse anymore, we understand why you don’t like doing this. To name a few:

  • It takes you away from doing the thing you really enjoy doing – you could be working on some great ideas to take the business forward, plus
  • It shines a light on things that need attention, which you don’t have the headspace for, and
  • Quite frankly, even if you did have the headspace, you just don’t have the time!

 

More good news! That’s where book-keepers and accountants comes in. We can help you, if you let us. Yes we cost, but we know how important every penny you spend in your business is, therefore this is why we want to add value, if you let us. 

 

You can offload your ‘paperwork’ to us, and all you need to do is check in with the app (or desktop version) to see how things are, and check in with us once a month. You’ll be amazed and how much headspace this frees up, plus we’ll even help you brainstorm things that need attention and put you in touch with other experts who can help you. As one of our clients recently said, it’s not always about time. It’s usually headspace and support I need more of.

 

*The most popular amongst business owners are Freeagent, Xero and QuickBooks. Speak to your accountant about which one they prefer to work with, as they may be able to offer a discounted price through them.

 

Now you have a more profitable business and more headspace you can now….

 

 

2. Look around your environment – don’t shrug it all off

 

Rarely a day goes by without the news reminding us about sustainability, politics and general wellbeing. Whilst you can choose to avoid these distractions as much as possible - purely on the grounds your brain will explode sometime soon - but if you run a business, and want it to be profitable, resilience and flexible (ie. successful), unfortunately you can’t ignore it. Sorry!

 

Your forecasting, business strategy and any modelling (business that is, not the art modelling) must take these into account. For example, if your business relies heavily on a natural resource, you must pay attention and consider the alternatives of the resource depleting, whether you agree with it or not. Nowadays, our customers will also expect you to have a sustainability strategy.

 

It doesn’t matter whether you think the news is nonsense or not. By all means, shrug it off in conversation but when it comes to business modelling, you must have a plan B and possibly a plan C too!

 

There is where a good accountant comes in again, especially those trained in industry (ie. a chartered management accountant like myself) have been well versed in PEST analysis and SWOT analysis, as have management consultants. PEST analysis assess the risk political, economic, social and technological. SWOT analysis explores strengths, weaknesses opportunities and threats in any are you choose. 

 

Both are incredibly versatile business modelling tools and considered an asset if used effectively, and are essential if you want to have a profitable business in a competitive market. No-one wants to spend hours on these, only to be filled in the bin with all the other nonsense, but they can be a god send, if the issue can be assessed quickly and followed with swift implementation. A management accountant, who offers advisory work like myself, can help you with this. 

 

That said, very few PEST analysis’ could have predicted Covid-19’s impact on our business, but we could have done the next big thing - ensured our profitability forecasting considers the good, bad and worst case scenario.

 

 

3. Future proofing: Stepping away from “If it isn’t broke, don’t fix it”

 

Continuing on from above, to ensure you have a profitable business, you must future proof your business, the most significant issue for many business today is technological, whether that be AI or streamlining your process. Unfortunately, most business owners will only change when pushed. For example, the Covid-19 lockdown forced us all (including most accountants…) into operating online and embracing technology, if we wanted to survive it.

 

Do you have to be pushed into doing something different? How many times is a suggestion put forward by an employee, or a recommendation voiced from your accountant or another trusted advisors, for you to knock it back with “No, we’ve always done things this way”? Unfortunately that attitude will no longer work in the fast changing, global, world we now live in. 

 

This doesn’t mean that you ought to change everything in your business, but if you really do want to have a profitable business, you must ensure you’re embracing the world you operate in. For example, consider for a moment how you watched films, or listened to music, when younger in comparison to how you do today. 

 

And the last crucial tip to have a profitable business…

 

 

4. Avoid oversells: Get your hands dirty instead!

 

As mention above in the first point, for you to have a profitable business you must pay close attention to your expenditure. This means ensuring you get a return, or at the very least ensuring the expenditure adds value to your business and your customers. Avoid oversells at all costs.

 

When money is tight, business owners can get emotional when it comes to money. When this happens, we can all be easily swayed to spend money on quick fix solutions and ‘magic pills’, which means we are more vulnerable to the ‘get quick rich schemes’. The honest truth however, is nothing will solve your money worries other than one simple action – your behaviour.

 

As a psychology graduate, I bring in behavioural economics insights to the advisory services I offer. This means I can tell you want the people selling to you know about your emotional needs and general knee-jerk reactions. They know when you’re more likely to buy on impulse and particularly in response to messages promising quick fixes that never materialise. They know you’ll buy based on what others are doing. This means they’ll tell you how many they sold in the last hour, or how many people near you bought this. They also know when you think the offer is scarce, you’ll have a small (or large) fear of missing out. For example, they’ll offer the product or service for 3 days only. You must be quick!

 

Does all this sound familiar? Don’t worry, we’ve all fallen for it, at least once. And none of these are bad things, not really. They are in business too trying to sell a product or service to those who need it. However, I don’t believe you always need it. Not if you have to put yourself in debt to get it. 

 

If you want to have a profitable business, that is financial resilient, please check out my profile and my other blogs, books and social media pages. Feel free to connect with me too to find out how I can help. 

 

I promise, I’ll never oversell to you. I really do just want to help. If you want to find out why, you can read all about it here: https://www.hmcoaching.co.uk/lets-talk-about-debt/

 

 

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