Are You Making Sales... or Are You Making Money?
As the business owner of a company, I'm sure you wear a lot of different hats. You balance the responsibilities of the HR department, accounting, marketing, operations, and, of course, sales.
So when your sales are up, and you're bringing in $5 - $10 million in revenue every year, you want to shout it from the rooftops. It's impressive to get high numbers like that, which is why we love to share these achievements with anyone who cares (or doesn't!)
But here's what no one is asking, and what you're not saying... how much was your company's profit? The bottom line? The leftovers?
Let's take a moment to define these terms.
Sales / Revenue = total dollar amount of sales for a service or product
Costs / Expenses = the money you spend to run your company
Profit / Net Income = the money left over from the sales less your costs
You're bringing in $7,000,000 in sales. Cue applause.
But you spent $7,100,000 to run your company this year...
That leaves you with a grand profit of... -$100,000. Yikes. Cue crickets.
You made all those sales, and nothing is left to show for it.
With all the blood, sweat, and tears you've put into your company, you certainly want more than a negative number staring at you from the bottom of that profit and loss statement, right?
Here are some tips to help increase your profit:
Set a more specific sales goal. Determine how much profit you want your company make. Add that number to the amount you're spending in annual company expenses.
Review your company expenses. Are there areas you're spending cash inefficiently? Services and fees that can be cut? Operations that can be streamlined to limit spending and increase cash flow? Speaking of which...
Limit your spending. Are you basing your company purchases on the dollar signs in the bank or on accurate bookkeeping? Have a professional build a company budget and maintain your books so your purchases are based on how much you'll have in a month, not just on how much you have right now.
Save your profit. If you followed the first suggestion and set a sales goal, don't let profit be something that happens. Set aside that amount in a separate account, and DON'T TOUCH IT. Let profit be something you control, save, and plan for.
If your business is absolutely killing it in sales, we are rooting for you! But we want that bottom line to be just as impressive, so your company can keep growing.
Want to find more ways to increase your profit margin? Contact us for a consultation and assessment.