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.
Perhaps you’ve listened to Simon Sinek’s famous TED talk or read his bestselling book Start With Why. If so, you probably already know how important it is that a company understands and communicates its ‘why’ (beliefs) to its customers. And believe it, we trust Simon’s ideas – they are, in fact, powerful and effective.
But today we want to explore a different angle on the concept of why. Ask instead, why isn’t your company profitable? Why isn’t it bringing in the kind of revenue you know it could? To determine why, it’s crucial to analyze every aspect of your business to figure out what needs to be changed, improved, or increased. Let’s better understand that…
1: Examine Your Daily Efforts
Are you spending a significant chunk of your workday checking social media? Or maybe you’re focusing on work-related tasks but not ones that generate revenue. It’s essential to identify how you’re spending your time. As a business owner, you should be honed in on making sales and completing tasks that drive revenue.
2: Examine Your Team’s Daily Efforts
If you have a team (employees or contractors), consider what they do every day. Ask yourself – how are their actions impacting your company’s bottom line? To be blunt, their deliverables should be moving the needle – not maintaining a stagnant status quo.
If you don’t have a team already in place, ask yourself why. If you’re doing everything yourself, chances are good that you’re not personally spending enough of your time on revenue-generating activities. This means that it’s going to take longer to reach profitability. You should try to delegate and automate as many tasks as you can – this means hiring.
3: Examine Your Cash Management
Next, evaluate how your company is managing its cash. Are you consistently setting aside money for taxes so you avoid getting hit with late fees or penalties? Are you utilizing the Profit First methodology to pay yourself first so your business remains sustainable? Are you minimizing your operating expenses whenever possible? Do you look at your financial reports regularly so you’re fully aware of what’s going on?
Avoid sticking your head in the sand when it comes to your company’s finances. All of these decisions – big and small – can greatly affect the profitability of your business.
4: Examine Your Strategies and Processes
Sometimes we need to take a step back and think about what strategies and processes we have (or don’t have) in place. For example, have you ever sat down and set a broad year-by-year strategy for your company? And if you did (nice job!), did you make it achievable for you and your team by establishing quarterly objectives and actionable daily tactics? Lacking this type of strategic thinking is one reason why your business might not be raking in the sales you’d hoped it would.
Don’t forget about the processes that support your strategy and goals too. Have you established customer service procedures that keep your clients happy? Do you have delivery processes that work effectively and encourage referrals? If not, it’s time to rethink this part of your business.
5: Examine Your Target Customer
Then there’s the importance of knowing your customer. If you’re not 100% sure who your customer avatar is (i.e., who you’re trying to sell to), it’s going to be a real struggle to reach them and use the right messaging. Without a doubt, not knowing who your target audience is will negatively impact your profitability.
On the flip side, if you have existing customers who suck the life out of you (you know, the ones who are aggressive, or don’t pay you on time, or haggle over every single tiny detail), it might be time to cut them loose. These kinds of customers can really drag you – and your profit – down the drain.
6: Examine Your Capital Needs
Ask yourself this: have you invested enough money into your business or is lack of funding holding it back? Do you have a sufficient amount of money to operate it properly or should you think about securing more capital?
Or maybe the opposite is true … you’ve taken on too much debt and it’s become a problem because you’re burdened by it. Either scenario can cause profitability issues and must be tackled head-on.
7: Examine Your Pricing
Finally, it’s critical that you price your products/services correctly. Price them too low and your profitability will suffer. Price them too high and your profitability will likely suffer too (fewer people will want to buy from you!) So, as you examine all the aspects of your business, make sure not to discount the impact your pricing has on your bottom line.
As you can see, there are numerous factors that can affect a company’s profitability. But don’t be intimidated! Start by considering the seven mentioned above and you’ll be well on your way to diagnosing and fixing any profitability issues that your company may be experiencing.
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.
