When you have great business ideas, products, and services and are working your tail off, you should be making a healthy profit. When this is not happening, despite great sales, you need to talk to a Fix This Next coach like Exigo Business Solutions. The advantage of working with the Fix This Next system is that you start with the core issues that are hurting your business and then progress to the next. Profit is typically the most basic problem in a business after sales.
Provided that you are selling lots of products and services, you should be making a profit. If there is a problem here are some of the first things that Fix This Next coaches look at.
Having sufficient credit and using it properly are commonly essential elements of success in a business. The key is to have enough cash on hand for your business to run effectively. For example, when you have good inventory management, you can finance your purchases of merchandise, knowing that you will have sales coming in before payments are due.
But, when your debt payments exceed your ability to pay, you are in trouble. You will not be able to get credit or will pay too much for it.
Deciding how to work your way out of excessive debt can be difficult when you are swamped by every other issue in your business. Here is where an experienced accountant as your Fix This Next coach can help you. You will end up with an approach that will get you out of excessive debt and keep you there!
Are you charging enough for your products and services? At what point will you lose sales if you keep raising prices? And, is the infamous Parkinson’s Law increasing your expenses? Many small business owners go the rule of them that a 10% profit margin is expected and if you are above or below that percentage you are more successful or failing.
Having said that, gross profit margins, operating profit margins, and net profit margins differ from industry to industry and within business niches as well.
You need to be able to do things like tracking costs by job or costs by sales using business intelligence tools. Fix This Next coaches like Exigo Business Solutions have been helping businesses assess and adjust profit margins for years.
This would seem like a silly question when you are selling thousands of widgets a day from multiple locations. But, if you are selling large, complicated technical equipment of processes, your sales may be infrequent. When this is the case you need to be able to juggle credit, payment schemes, business costs, and all of your cash flow so that you do not routinely run the risk of going out of business! At Exigo Business Solutions we have years of experience dealing with all manner of businesses, including those that are very successful but need to deal with occasional large sales instead of selling hundreds of widgets a day.
Operating leverage is an important aspect of a profitable business. High tech companies that develop software, employ programmers, and have viable product lines have high operating leverage. Once they have made enough money to cover the cost of development, most of every dollar coming in is profit. On the other hand, a supermarket has low operating leverage. Then every item that they sell has a cost, no matter how much they sell. Determining your degree of operating leverage and how to address it can be critical to business profits.
You may be making a lot of sales, but if your expenses occasionally exceed your revenue, you need to have a cash reserve. Credit is OK but cash on hand for both emergencies and day to day operations is better. Fix This Next coaches like Exigo Business Solutions will help you determine what a healthy cash reserve should be for your business and help you obtain it.
Business Efficiency Is Important for Profits
We mentioned Parkinson’s Law. This is an observation that work tends to expand to fill all available time. Its corollary is that any project tends to eat up its budget (and more). At Exigo Business Solutions we work with our clients to make sure that their businesses run at top efficiency and that Profit comes first.