5 Ways Entrepreneurs Can Become More Profitable
However, before I begin, allow me to explain the difference between revenue and profit. I find that many entrepreneurs confuse the two. Revenue is your top-line number. This is the gross amount you receive for the services that you provide. Profit is your bottom-line number. This is the net amount, after all expenses and costs to provide your services and products have been subtracted. As an entrepreneur, your goal should be to continuously increase your bottom line because this determines the true health of your business.
Here Are 5 Ways to Become More Profitable:
1. Plug Money Leaks – Review your expenses over the last 6 to 12 months. Identify charges for subscription services that you are not currently using. For example, those free 30-day trial offers that begin to withdrawal funds from your account afterwards. Usually, you have forgotten about the charge 30 days later or maybe you barely use the services. Either way, cancelling these will increase your bottom line. Or perhaps, you offer free 30-minute consultations that always go over the time. Before you realize it you are still consulting 1 or even 2 hours later. This could have been additional revenue generated if you would have positioned yourself for the upsell.
2. Save 5% of Every Invoice Total – Open a separate business saving account outside of your regular banking institution. This will be called your Profit Account. Each time a payment is received, transfer 5% of the payment into your Profit Account. You are now building a cash reserve for your business that will bring you financial peace of mind. This will also prevent stressful times during your slow season. In addition, I recommend that during peak seasons you double up on your savings from 5% to 10%, even 20%.
3. Budget Before Purchasing – Many times entrepreneurs attend events where there is a 100% chance of spending money. We are quick to swap our card on drinks, food or little items that are forgotten after the event. Later in the month when cash flow is low we begin to wonder where the money disappeared to. This drains your bottom line and places you in a financially stressful position. My advice would be to budget for the event before you attend. Include in your budget travel, meals, room and board, and miscellaneous items. Then, on the day of the event, do not carry your bank card. Only carry cash based upon your budget. This will enable you to keep your current financial position top of mind and prevent overspending.
4. Question Before Purchasing – Before making a purchase you need to determine the motives behind the purchase. For example, by purchasing the “next best item” determine if your business will truly benefit from it. Many entrepreneurs suffer from the “shiny object syndrome,” only to realize later that the item was a waste of money. Before making a purchase ask yourself the following three questions:
- How will this purchase impact my bottom line?
- Is this item truly needed or can I survive without it?
- Will this purchase cause more revenue to be generated in my business?
5. Rebuild Past Client Relationships – Before a potential client is willing to purchase from you, you must establish the “know, like and trust” factor. If you have past clients, you have already established this prerequisite for purchasing. Begin rebuilding a new connection with them to encourage a new purchase or to produce referrals. For example, send a postcard, conduct a “Just Checking on You” call, or invite them to a “Reconnect Virtual Coffee” chat. If you have serviced your past clients with excellence, they are more willing and faster to purchase from you again.
Remember, profit is the bottom-line number. Maintaining a healthy bottom line is needed to achieve longevity. Begin by implementing the above 5 strategies to increase your profit today.
Octavia Conner is a profit increase expert, accountant, and speaker. She helps service-based female entrepreneurs turn their passion into profit and generate their first 6 figures and beyond. To learn additional ways on how you can add more money to your business download her free money guide – 23 Ways To Open the Money Floodgates In Your Business.