However you measure the success of your business, it needs to have healthy finances and you need to make the best possible use of your time.
It’s therefore crucial that you pay attention to profitability and productivity. Here are five key elements of that:
It’s therefore crucial to the success of your business that you pay attention to profitability. Here are five different ways you can enhance your profitability:
- Planning: To make everything happen, you need a clear plan and calendar of activities.
- Productivity: It’s easy to be busy but you need to use the time effectively.
- Pricing: It’s important to charge enough to make the profit you want.
- Predicting Cash Flow: It’s not enough just to make money; you need to ensure it flows in time to pay the bills.
- Performance Improvement: You should always be looking for ways to get better results at lower cost.
If you want to make the most of your expertise, it’s not enough to have a great idea. You need a plan for turning it into reality. A good plan is built around three key elements:
- Big Picture: You need to start with a clear idea of what you want to achieve. That means defining specific short-term and long-term goals. A plan begins with a clear view of the destination.
- Projects: When you know your goals, you can identify the key projects you must complete to achieve them. When you develop projects based on your goals, you are more motivated. To identify projects, look at your goals and identify which major activities you need to undertake now in order to achieve them.
- Priorities: Now that you have specific goals and defined projects, the important part is turning them into actionable tasks and setting priorities. Tasks are usually actions that take a short time – anything from a few minutes to a few hours. One way to identify tasks is to look at your projects and ask yourself what specific actions you need to take now to complete them.
When you run your own business, your most important resource is your time. So the degree to which you achieve the best use of your time will determine your success and your profitability. The three keys to making the best use of your time are:
- Knowing how much your time is worth: The most obvious way to value your time is dividing your desired annual earnings figure the number of hours you want to work in a year. When you think of your time as worth your hourly rate, you might start to earn it!
- Making best use of the limited time you have available: Your day can be split into productive time – spent with clients, creating products or generating income – or unproductive time – checking emails, answering the phone, surfing the web or talking to friends, which makes you no money. If you recalculate your hourly rate based on your number of productive hours each day, it will be much higher.
- Only doing things that earn the value of your time: Once you know how much your time is worth, you can easily ask yourself if what you are doing is worth your hourly rate. If not, it’s easy to find someone else to do it via outsourcing. Outsourcing can make your day a thousand times easier and more profitable.
Often people who run their own businesses like to do things themselves – either because they feel they are best at it or because they don’t like to spend money.
When you discover that others are often better at the tasks and will do them more cheaply than you can, it frees up your time to concentrate on what makes you money.
Freelance sites such as www.fiverr.com can transform what you achieve.
One of the biggest challenges many business owners face is setting the right prices for their products and services.
Sometimes the best prices will be fairly clear if there are similar offers in your marketplace. However, the big mistake many people make is they don’t charge enough.
That’s often because of the simple mistake of believing that more people will buy if the price is lower. This harms their profitability.
Charging low prices is often a mindset issue where people don’t value themselves and what they can do highly enough.
Often setting higher prices is the best way to increase your profits – provided you deliver value and communicate effectively.
Predicting Cash Flow
As well as charging suitably high prices, you must make sure the money is coming in fast enough.
You need to set budgets that enable you to see when money is coming in and going out. That enables you to define what you can spend in development and marketing.
It’s great to know that you’ll earn $100,000 next month but you also need to know that you have expenses of $50,000 this month!
To improve your profitability, it’s vital to monitor everything you do in your business, including:
- Time: Tracking your time helps ensure you spend your day productively.
- Track: You need to track every dollar you spend on marketing and advertising to make sure you get an adequate return on investment.
- Test: You should always be testing new approaches to marketing – whether it’s the headline on your sales page or new advertising media.
Your success in each of these areas will have a big impact on the success of your business.
IN addition to profitability factors, having the right psychology is one of the keys to business success.