If you want to sell your small business someday you need to create more profit.
“Thank you Captain Obvious.”
You know that, right? A small business that creates more profit is more likely to sell.
Again, thank you Captain Obvious.
First, it’s not that obvious to everyone.
- “We create profit every year, but we re-invest it all back in the business.”
- “We spend down our profit to eliminate our tax liability.”
Profit only exists if it’s protected from you, the owner, and actually stays on the bottom line. Because that’s the only “profit” that a buyer can use to finance your business.
Your small business needs more profit.
But once you get past the obvious conclusion, things start to get foggy fast. If there are 100 roads to a profitable business, there are 100,000 ways to lose that profit.
There’s no one right answer. Every business owner needs to find their own, best way to increase profit.
CIT Direct Captial asked 30 experts what they thought was the #1 to increase profits. See Full Article Here
If you take a look at the different approaches suggested by the experts, not surprisingly, some of them directly conflict with each other. But both sides of the conflicting advice might be right — depending on your situation.
Below are a quick summary of just a few of the 30 responses:
The #1 way for small business owners to increase their profit margins is:
- Increase prices.
- Reduce IT cost.
- Think long term approaches.
- To regularly review your client list to determine several things:1. Who is making you the most money right now?2. Who has the most growth potential? Create a written plan for each of those clients and work it like a rented mule!3. Who isn’t making you money or doesn’t have growth potential?
- One word: sales!
- Realizing that margins are fluid.Small business owners often fail to realize that margins are fluid. Many businesses focus heavily on increasing income and forget that expenses are also fluid. Sometimes the most effective way to improve your profit margins is to decrease your expenditures.
- Find that near-perfect manufacturing partnership.
- Renegotiate terms and rates with current vendors or referral partners.
- Eliminate waste.
- Either 1) lower your customer acquisition costs (we prefer to do this by making digital marketing, advertising and landing pages more efficient), or 2) increase your price.
- Get more out of your current customers.
So, if you want to increase your profits all you need to do is . . . raise prices, while cutting costs and increasing sales or . . . fire unprofitable clients, while increasing sales, and cutting IT costs . . .. or . . . .again, maybe it’s not that obvious.
While many will tell you what you should try, ultimately you as the owner need to explore until you find what works for your business — especially if you want to sell the business someday.
The right profit formula might not be obvious, but it is something you need to keep searching for.