Running a small business is no easy feat. There’s always something else on your never-ending list of responsibilities and when you’re forever slogging away in your business for little to no return it’s easy to wonder if it’s all worth it. If this is where you’re at, it’s time for you to review whether you have the right structures in place to support your business profitability and sustainability for long-term success.
When it comes to developing and sustaining a successful profit margin, it’s understandable to feel intimidated. The good news, though, is that you’ve come to the right place. Detailed below are the 4 key things you need to know about setting up a profitable small business – without the financial jargon!
It’s worthwhile to establish the financial security of your small business and its future. So we invite you to read this advice and take the next steps outlined at the end of the article so that you can be sure that you’re moving your business forward in the right direction.
The 4 Key Structures You Need in Place To Build A Profitable Business
1. Develop a Detailed Set of Realistic Financial Goals
The first step in setting up a profitable small business is to create a set of goals that you’re aiming to achieve and the timeframes associated with them.
Goals might look like monetary figures, or they may be lifestyle related, expansion related, or professional profile raising goals.
There is no right or wrong answer to YOUR business goals. Setting these goals almost like your vision for the business and the results you want to achieve for the business and yourself.
Once you have outlined the goals, then you work backwards to determine what revenue you need to make them a reality.
Then you work out what expenses and operations are required to achieve that revenue goal. This includes things like paying you (don’t skip this part!), your employees and contractors, your investors, your operating expenses, and your taxes.
Outlining business and financial goals will help you stay on track. By pursuing specific goals, it’s less likely that you’ll spend your money on frivolous items or get sidetracked by operations that take away from your goal destination.
2. Establish Profitable Pricing Formulas for Your Products and Services
To help maintain a profitable balance in your business we then consider how the money is coming into your business. Further to this, in order to setup a profitable small business, you need to be smart about your pricing so that the money coming in isn’t just flowing straight back out again.
The first step to profitable pricing is you need to know your numbers.
Pricing starts with knowing exactly what expenditures are necessary for your operations, and what your margins are. Including your general business overheads.
To know what your operational costs are, and so that you can price your offerings profitably, we recommend that you invest in an accurate bookkeeping system – and use it regularly!
3. Use An Accurate Bookkeeping System
To build any kind of successful business, it’s crucial that you keep a record of where all of your business’s money ends up, and where it’s coming in from. So, start by taking a look at your existing bookkeeping system.
If you need to, invest in a better bookkeeping software solution that can record all of your income and expenses directly from your bank feeds, and we recommend using an online bookkeeping system that can be accessed from anywhere (like Thriday) so that financial support can be easily provided – especially from a Profit First Professional.
Once you have your bookkeeping system in place, set yourself a regular schedule (or outsource to a certified bookkeeper or BAS agent) to keep the financial records of the business up to date. And if you do outsource the bookkeeping side of things, make a time once a month to actually review the figures to see the flow of cash through your business.
For one thing, setting this up is much more convenient to you during tax season. Secondly, knowing your numbers sets you up for long-term success as you can quickly and easily see the profitable and not-so-profitable aspects of your business at a glance.
4. Review Your Expenses on a Regular Basis
With an accurate bookkeeping system in place, one of the key things to do on a regular basis is to analyse your overall business spending plan and how your expenses align with that budget. After all, if your expenses are blowing out regularly you’re highly likely eating into your business profits.
Are your expenses higher than your income avenues? If so, it’s time to reevaluate your spending habits.
Perhaps there are areas where you didn’t realise significant spending was going on. Maybe you find some expenses that can be cut without damaging the operational side of your business.
Implementing Profit First is a great way to not only manage your business expenses more effectively, but it can structure your business finances in such a way that your business becomes sustainable and profitable at the same time.
When you design your business’s budget using the Profit First approach, it’s common practice to designate a percentage to your overall expenses. Doing so will help keep your business’s expenditures from maxing out.
Our key tip for setting up a profitable small business: Don’t spend money on resources that don’t help you make more money in the future.
Ask for Professional Guidance
Pricing and profitability can be quite tricky, especially when you’d rather be focusing on doing what you do best and not the numbers. Which is why it’s good to get professional advice and an outside perspective.
There are a number of trusted money management professionals who can help you establish a long-term profitable solution for your business.
Support of this nature can come from:
- Accountants
- Bookkeepers
- Financial Planners
- Qualified Business Coaches
- Certified Profit First Professionals
Investing in external business and financial advice gives you a useful outside perspective of your business and its room for improvement. As business and financial experts, they can also evaluate your business’s budget with you and find a way to decrease your overall expenses while maintaining – or increasing – profits and business growth.
It’s up to you, though, to take the strategies and advice provided and implement them.
Start Creating Your Profitable Small Business Today
At this point in the article, you have a thorough understanding of how to set up a profitable small business. In short, you just need to ensure you’re making the most of your business’ investments and resources. By investing in setting your business for solid profitability, you are investing in the longevity of your business.
You can take the first step to make your business more profitable with our FREE Profit First instant assessment. Completing this assessment will help you assess where your revenue and expenses sit now, and where they need to be.
And if numbers and strategy aren’t your forte, this is where Profit First Professionals can help you. We prioritise bringing our clients, like you, the most qualified financial guidance on the market.
Our goal is to help you make your business profitable and sustainable. That’s why we encourage you to consider reaching out to us for support in setting up a profitable small business. We can then pair you with a Certified Profit First Professional to bridge the gap between the business you have now, and the profitable and sustainable one – that actually pays YOU well! – that you are working towards.
