We often hear success stories about new businesses immediately hitting the profit jackpot. In reality, though, most companies – if they’re able even to stay open – don’t make a profit for at least several years. If you’re a new business owner, you’ve hopefully planned for this delay in income but remain eager to start bringing in more money. After all, earning money is one of the reasons you decided to become an entrepreneur in the first place.
It takes hard work to learn how to make a profit in business. You’ll need the right knowledge, strategies and tools, a viable plan, and a commitment to continuous and neverending improvement.
How to make a profit in business
For all businesses, large or small, making reliable profits is the name of the game. New businesses, however, must first concern themselves with building a foundation that supports sustainable business growth. Here are some things you need to know about how to make a profit in business.
1. Understand financials
What does it really mean to make a profit? The money coming into your company is considered revenue, but before the money hits your bank account, you’ll have to cover business costs such as payroll, taxes, supplies and other expenses. What’s left is your profit margin – the magic number that determines whether you’ll stay in business, experience explosive growth or be forced to close your doors.
You also need to understand financial statements and basic financial terms. You can’t fly a plane without knowing how to read the gauges; the same applies to business. Learn how to read a balance sheet, income statement, and cash flow statement, and you’ll be able to participate in conversations about how to make a profit.
2. Create a business map
Every successful business starts with a plan or a business map, which is more than just a way to get from point A to point B. A business map prepares you for anything by outlining different scenarios and connecting them to your overarching company vision.
Your business map will include a plan for how to make a profit. What can you do today, this week or this month to improve your quality of profit ratio? Working with a business coach will also be invaluable as you work towards creating a sustainable and scalable business plan.
3. Set realistic goals
With any new venture, it’s easy to start thinking about the end goal. Today, you’re opening your business; tomorrow, you want to make $10 million. However, if you obsess about achieving massive profits right off the bat, you’ll miss other opportunities and quickly become overwhelmed.
Think in terms of incremental growth. Set SMART goals – Specific, Measurable, Achievable, Realistic and anchored within a Time Frame – improve your processes and systems, and focus on steadily increasing profits over time. Everything worthwhile in life takes work. Don’t be distracted by “quick fixes” or get caught up in the rat race. The best way to make a profit is to focus on long-term growth and what’s right for your business.
4. Identify what’s holding you back
As you go through the process of learning how to make a profit, take an objective look at your entire organization. What’s currently preventing you from making money? Is it a lack of viable leadership skills? Is it a problem with your sales team? Have you not spent enough time getting the word out about your brand?
The problem may also be something within you: Are you emotionally holding on to something limiting your company’s growth? Are you sabotaging yourself with limiting beliefs? Identify what’s holding up your plan to increase profits and seek out personal or professional tools to break through these barriers.
5. Hire right
Tony always says, “focus on your strengths and hire for your weaknesses.” Identify your strengths, learn how to leverage them in leadership, then identify your weaknesses and hire to fill those gaps. For example, You may need an accountant, bookkeeper, or an incredible sales team.
Hiring raving fan employees who support you 100% is also a good idea. You want them to know the company inside and out and understand when it’s time to rally the troops to bring in new business. It’s always easier to succeed with a team of people excited to work for your brand.
Finally, think about how you can better retain your existing employees. Do you need to hire fresh talent, offer more benefits, or change the company culture? Do you need to invest more in your employees’ well-being? With the right mix of leadership, inspiration and incentives, you’ll find the key to how to make a profit in business.
6. Add real value for your customers
Make sure your business adds real value for your customers because this is how you make money. The bottom line for making a profit isn’t a number – it’s the value customers place on your business’s product. When someone finds a product that fills a longstanding need, they fall in love.
How do you add value your ideal customer can’t ignore? Prioritize your market research to understand their lifestyles and tastes. When you inhabit your customers’ minds and preferences, you can create exciting innovations customized to your market. Then, as you innovate, track how your buyers respond so you can adjust your strategy as needed.
7. Focus on strategic innovation
It’s rare to find a company that offers its clients a unique new product. Nowadays, successful businesses tend to strategically innovate by expanding on existing ideas in a way that appeals to their customers. To truly understand how to make a profit, focus on identifying your customers: Who are they, and what need do they have for your product?
Netflix is a prime example of a strategic innovator. Before streaming exploded in popularity, people were happy to rent physical media at Blockbuster. Netflix capitalized and found a way to make movies more accessible to their target audience. They strategically innovated – fostering an innovation culture will put you leagues ahead of your competitors and help you make a profit.
8. Leverage your connections
Running a profitable business requires far more than just number-crunching and managerial savvy. Business success hinges on many factors, including the ability to build connections. Look at your network as a collection of strategic alliances rather than a collection of individuals.
Build relationships with complementary businesses in your industry, and consider partnering with them for referrals. Learn to leverage your connections, and you’ll increase your ability to make a profit.
9. Customize your customer engagement strategies
Understanding how to make a profit means taking a close look at how you engage your target market. There is no universal sales or marketing strategy, so customize yours to fit your product and clientele.
Given modern technology and the popularity of social media, for many products, outreach is about immediacy. Engage your target market digitally through your website and social media so they can easily access and learn about your product. In addition, attract more customers by adding interactive tools like webinars and demos.
10. Take massive action
Once you overcome barriers and figure out how to grow and strategically innovate, it’s time to plan for making a profit. Start with developing a timeline and a series of steps you (and your team) can take to increase your profit margin.
Then make a massive action plan to help you jumpstart growth and increase profit at your business. This may involve creating a new department, launching a new marketing campaign or undergoing leadership training to make you better equipped to lead your company. Whatever you need to do, include it in your plan so that you have concrete, achievable company goals.
11. Track your progress
Creating an action plan doesn’t mean your choices are set in stone. Monitor your results as your plan progresses. Have you figured out how to sustainably make a profit? Set times to check in with your team and reevaluate your progress.
Tracking progress allows you to evaluate what’s working and what isn’t, refine your profit strategies, and gather employee feedback. If you consistently miss your goals, is it because they aren’t realistic? Or are you focusing on the wrong areas? On the other hand, if you quickly achieve your goals, it’s time to ramp up your goal-setting – and your profits.
12. Don’t waster your time on low-value tasks
Learning how to make a profit involves understanding which tasks are the most profitable. Once you know, you can eliminate unnecessary low-value tasks or outsource necessary but unprofitable tasks.
Automation also has a part to play. With so many businesses moving into the online space, automation software and online solutions are becoming more popular and accessible. Whether using a customer management system or setting up an automated drip email campaign, there are many tools available to deal with low-value tasks.
13. Price your products or services correctly
To make consistent sales, you must ensure your products or services are priced correctly. Low prices won’t sustain your business, and overpriced products will struggle to be competitive in your market. To find the perfect price point, evaluate your market and competition and determine a competitive pricing strategy that can also cover your business costs.
Business success takes time and effort, but for those who try, learning how to make a profit isn’t rocket science. These thirteen strategies will get you off to a great start, and with hard work, a good plan, and the right tools, you’ll put yourself in the best possible position to achieve the profits you dream of.