Use This Profit Margin Formula to Protect Your Profit from Yourself
Financial coaching plans work for a lot of people who aren’t business owners, because in business, we need to handle our finances differently so we can increase business profitability. And while plans like the popular Dave Ramsey plan will work for managing personal funds, it was not designed for someone in business.
The best way to handle our money as a business owner aside from hiring an accounting service is to protect our profits from ourselves. What does this mean? Well, when we go into business, we want to be able to make money out of it. The mistake is when we allow the business to run our lives instead of running the business so we can live and enjoy our lives.
Additionally, many new business owners end up spending their profits in one go because many are not used to having that much money on hand, or they end up mismanaging their funds severely and haven’t paid attention to their profit margin formula. Always remember that the business is there so that we can make money that we can then use to achieve goals or get whatever we want out of our lives.
In order to protect our profits, here are some ways on how to increase profits for small businesses.
Funding Development Programs for Employees Is a Good Way to Invest Business Cash
Our employees help our business become what it is meant to be. They are among the most vital assets in our business. It only makes sense to take our profits and use them to help in their professional growth.
By doing so, we not only help them develop more skills to further their career goals, but we also end up benefiting from their new knowledge. More importantly, we help promote a more positive outlook in the workplace by improving employee satisfaction and hopefully strengthen employee loyalty in the process.
Enhance the Competitive Advantage of the Business
The enhancement of a company’s competitive advantage is an essential part of its long-term achievement. In order to develop and even defend this advantage, a company must have exclusive products or services that are a result of years of continuous study and expansion.
Think of it this way: as time goes on, newer innovations are constantly introduced to the market. And over time, the preferences of our customers change. For our business to stay ahead of the game, we must be able to maintain if not surpass our existing position in the market.
We must never be content. Rather, we should always strive to be better versions of ourselves and improve our products, processes, and our company. When we become too relaxed, we stand the chance of being overtaken by our competitors, and this is a risk that any business owner cannot afford to make. By working to increase business profitability and wisely using our profits to enhance our brand, we can experience growth that is healthy and easy enough to maintain.
What Can a Business Do With Its Profit? The Answer Is to Outsource
There is a saying that goes “Jack of all trades, master of none.” What the saying refers to is a person who tries their hand on everything. For example, learning how to cook, learning to do masonry, learning to do plumbing, but never being really good at one of them.
When we go into business, we hire professionals to help us create our brand. This could mean hiring someone to design our logo, advertising materials, etc. Now, some people think this is an expense that could simply be avoided just by learning to do all these things rather than hire someone.
So, what happens is that hours are spent learning how to use programs to create logos, print out merchandise, flyers, banners, etc. Hours turn to days and weeks because we must perfect the design, and since we are doing it ourselves, we can change as much as we want to because it’s free anyway, right?
Wrong! The most successful businesses know that above all else, the most valuable thing is time. So, rather than waste precious time working on random skills we won’t likely be an expert in, we hire someone who already excels in this department.
When we delegate tasks that are beyond our own skillset, we give ourselves more time to handle more valuable business concerns. Outsourcing may not initially sound like a cost-effective way to manage our profits or increase business profitability, but when we are able to hire quality workers, their expertise and skill will easily outweigh the initial cost on a long-term basis.
Understanding That There Is No Such Thing as Passive Income
It is the dream of many people who go into business to be able to have one that generates income without needing to put in work. There is unfortunately no such thing. In order to generate profit, work must be put in. The profit that continues to grow creates a business that is more established and can lead to less work.
The keyword is “less” and not no work at all. Striving to have a business that does not need us to work on it full time is a healthy goal, and this can be achieved by properly managing our profits. When we fail to do this, we lose the efficiency of the business and the funds it generates.
How to Spend Profits as a Small Business Owner
When we say we need to protect our profits from ourselves, this does not mean hiding it away in a bank and never touching it. It does not mean not spending a single dime of it. What it simply means is to use the profits in a way that benefits us. TIP: now and understand your profit margin formula to help with this.
We as business owners must understand that we deserve to enjoy the profits as long as we manage them correctly. This can be through various investments in the business or in other aspects of our life. When we do this, we are able to properly profit from our profits.
In This Video: Increasing Business Profitability
If you’re discouraged by your profit margin and ready to make some changes, listen to the most recent episode to how to increase your business profitability. With our profit margin formula, you can start meeting your quarterly goals. You’ll learn some real-life profit making business examples.
Spoiler alert here: the biggest obstacle to boosting profitability is you. Learn how to take you out of the equation and how to apply strategies to increase profitability. You know your why, your goal. Protect the Profit knows how to coach you in proven ways to increase profit. If you’ve spent too much time googling “how to make more money in your small business,” this episode is for you!