Your business is your lifeblood – you have poured your passion and determination into it to make it a success. You’ve spent countless late nights and weekends to create a business you are proud of, but how can you ensure your small business remains profitable as you grow?
With growth often comes more expenses – staff, premises, marketing – so the profits may feel harder and harder to grasp hold of, which makes some business owners feel they should have stayed as a micro-business, or one-man-band. But there are ways to help ensure your small business stays profitable, and as an accountant, here are my tips to help you boost your business’ profitability;
1. Your turnover is in your existing customers’ pockets
It’s a common trap that business owners strive for more new clients. It’s not a secret that obtaining new clients is more expensive than upselling to existing ones. It literally costs you nothing.
You need to listen to your clients and be professional at your trade. Schedule regular calls and make sure that someone in your team is contacting your client database at regular intervals.
2. Invest in your call script or a compassionate client manager
Closely connected with the advice above but different. How many times have you received a call from a service provider and the person on the other side sounded like a machine?
There are two reasons: either their call script sucks or the person reading it is not remotely bothered. Either way, identifying the problem and fixing it will boost your sales.
3. Continually review your expenses
Without being able to regularly understand and review your expenses, you won’t be able to know where you can cut or increase costs.
I recommend having at least a quarterly review of your business Profit and Loss statement and discuss it with open-minded, unbiased and trusted people.
4. Know your margins
A good accountant should be on your side, helping you to develop the right margins for your business to charge so you can have the right amount of profit to satisfy your needs. They should also help you work out how many clients you should be working with, based on the amount of time your team has.
It’s not about “get more clients = more profit” it may actually be that your margins are not suited to the number of clients you can serve in any given month, thus affecting your profitability.
5. Negotiate costs
It seems, particularly in the UK, negotiation is an unspoken thing. Without negotiating, you won’t get the best bang for your buck. Don’t be afraid of renegotiating with your suppliers, especially if you are spending regularly with them.
Go about the negotiation politely and calmly, with facts and figures to help support your point. With a small discount, especially on high volumes, you can cut costs dramatically, helping to increase your profits whilst continuing to have an excellent relationship with the suppliers you work with.
6. Calculate who your best-paying clients are, and the worst
It is easy to see who your best and worst clients are on the balance sheet. Invest your time in your VIPs, encouraging them to continue working with you and upselling to them. Identify their traits and go after similar potential clients who will hopefully behave in a similar way.
Work out how to exit the clients that are not making you enough profits. This may feel counterintuitive but consider the money it is costing you working for clients that do not pay you enough, on time, or value you. With the time not working with these clients, you can find more VIP clients – this means more profits and enjoyment for you.
7. Consider your office options
The recent outbreak of Covid-19 has forced many businesses to start working remotely and it has shown that many who had an office don’t actually need one. Do you really need it?
If you must have an office, then consider the place you are in at the moment, can you negotiate costs, or perhaps you can reduce the size and encourage a flexible working schedule for your employees? Office space is often the highest expense for a growing business, so really consider your options.
8. Automate, automate, automate
The beauty of having systems and automation in place is that your time spent on tedious tasks is drastically reduced. Where can you set up automatic systems? Invoicing, expense payments, sending quotes etc are all tasks that can be quickly and effectively automated.
With the time saved, you will be able to spend more time with clients providing your services, thus increasing profitability.
9. Have a strategy for your pricing and services
Alongside your knowledge of margins, you need to have a strategy in place that covers how services are priced, how to deal with income and expenses, how to accumulate reserves for your business and know what your salaries & overheads are. With this information you will have the clarity to be able to create a strategy for your pricing.
As with all parts of your business journey, you need to have a clear understanding of what you want to achieve and have people around you who share your values. Don’t feel you need to know everything when it comes to business, but find people that can support you where you need it most, and your business will rocket.
About the author
This guide has been written exclusively for ByteStart by Elena Meskhi, a certified accountant and tax adviser, and founder of accountancy firm, Elena Meskhi & Co. She is also the author of a new book, Rewire Your Business For Success: the 6 step method to increase profit and reclaim your freedom.
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