Businesses exist to make a profit. If you don’t care about making profits you are not in business. It is perfectly acceptable, even desirable, to want to make profits with integrity and without compromising your values but you must aim to make a profit.
A profit allows you to continue in business; to support other initiatives that matter to you; to get the work life balance that you desire, and more… How you invest your profits is up to you and your shareholders and other stakeholders but a top priority in your business should be to make a profit. Ideally you want to make more profit this year than you did last year so how will you do that?
Start by taking an in depth look at what you did last year. How much profit did you make? Where did that profit come from? Were some products and services more profitable than others? Which customers were most profitable? In a typical business the Pareto Principle or 80:20 rule applies. 80% of your profit will come from 20% of your products or services. 20% of your customers will generate 80% of your profit. So you need to know which are those products, services and customers.
Once you are clear about where your profit comes from you can look at ways to increase it. Can you find more customers like your most profitable customers? Could you do more to promote your most profitable products in order to sell more? Are there ways in which you could trim costs from your less profitable services? What should you stop doing because it simply doesn’t make money?
Do you need to change your business model or route to market (i.e. the way in which you sell your products or services)? Do you need to add new products and services? Do you need to do more marketing? Do you need to bring in more help?
If you carry on the way you have been doing you are unlikely to generate significantly better results. Set yourself a target for increasing your profit. If you only go for a 2% increase you may barely keep up with inflation. Why not be ambitious? Could you make another 20% or even 50% by doing things differently?
Once you have set your target you can develop a detailed plan to make it. Our ‘My Marketing Planning’ tool has been designed to help you develop that plan. It consists of a workbook, nine videos and a financial planning spreadsheet and is available in three versions depending upon how much help you want. Email me for details.
So to summarise:
- understand where your current profits are coming from
- look for opportunities to increase those profits
- set an ambitious target to increase your profits this year
- develop a plan to achieve that target.
If you have any experience or tips that will help other readers to make more profits in their business I would love to hear them. Please use the comment button.