Written by: Tuesday P. Brooks, Executive Contributor
Executive Contributors at Brainz Magazine are handpicked and invited to contribute because of their knowledge and valuable insight within their area of expertise.
We’ve all heard the word practice before. As in, practice makes perfect, practice what you preach, and you should put what you learn into practice. And what’s interesting, although you probably rarely think about it, is that the word practice can be used as either a noun or a verb. As in, per Oxford Languages, the “application or use of an idea, belief, or method” (noun) and “to perform an activity or exercise a skill repeatedly or regularly to improve or maintain proficiency” (verb). This article is about the practice of profitability within a small business (something that is very important to all of us small business owners!)
Practice as a noun
So, what exactly does the “practice of profitability” actually mean in a business context? Put simply, it suggests that we must first determine what profitability is (according to Gartner, by the way, profitability is defined as the “measure of an organization’s profit relative to its expenses”) and then how to achieve it in the context of what our organization does. Finally, we must act on these determinations. In other words, the practice of profitability in this instance is a “thing” (knowledge) and it comprises three main components explored below.
The 3 primary components of the practice of profitability
A business owner who is implementing profitability as a practice should focus on three areas:
Sales: It might seem obvious, but it’s worth noting that a business must make sales so it has money coming in.
Cash Management: Once the sales come in, it’s necessary to manage the cash properly. This typically includes taking steps to minimize costs, and striving to allocate the money correctly across needs (expenses, savings, investments, etc.)
Routine: After generating sales and managing the cash begins to become second nature, the business owner should create processes so this routine can occur over and over again in perpetuity. Why? So the act of bringing in revenue and handling it properly becomes a regular standard practice that continues to keep the business profitable.
Practice as a verb
This is the version of practice that most of us are familiar with—practicing a sport or an instrument until we are proficient at playing it. When we apply this understanding to the concept of profitability, it essentially means that we should repeat what we understand about the topic continuously, so we get really good at it over time. We’ll observe all the rules and teachings (kind of like religion!), carry them out, and then do it all over again.
The main takeaway is that profitability for a small business owner shouldn’t be achieved haphazardly or randomly. Maybe in the beginning, but after some time, it’s critical that the company establishes repeatable procedures that enable it to reach profitability over and over again. So as you think about profitability in terms of your own business, consider adopting the mantra “practice of profitability” and make it a reocurring process that continues to drive sustainable growth for a long time into the future.
Tuesday P. Brooks, Executive Contributor Brainz Magazine
Tuesday P. Brooks, MBA is a business owner, educator, trusted tax & accounting advisor, and fierce champion of small business. Unwaveringly devoted to financial fluency Tuesday’s mission is to accelerate the profitability of financially-sound, women-led companies that employ across the U.S. As such, she works tirelessly helping women founders gain the confidence to take a leap of faith towards growth so they can tap further into their joy of business ownership more easily.
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