You hear some success stories about new businesses instantly making tons of money, but the reality is often much different. It usually takes years for new companies to discover how to make a profit – and that’s if they’re able to stay open at all. If you’ve recently started a business, you’ve hopefully planned for this delay in income; however, you’re also eager to start bringing in more money. After all, this is one of the reasons why you’ve decided to become an entrepreneur in the first place.
A profitable business doesn’t just happen. So how do businesses make money? You’ll need the right knowledge, strategies and tools – and you’ll need a plan. Commit to constant and never-ending improvement, and you can learn how to make a profit in business.
HOW TO MAKE A PROFIT IN BUSINESS
Businesses large and small have the same goal: reliable profits. Those just starting out have a few extra considerations as they build the foundation required to grow their business sustainably.
1. UNDERSTAND FINANCIALS
Before you can answer that question, you need to understand what it really means to make a profit. The money you bring into your company is considered revenue – and you don’t get to put all of that in the bank. Once you pay for costs including payroll, taxes, supplies and other expenses, what’s left over is your profit margin. This is the real number that will determine if you stay in business, experience explosive growth or have to close your doors.
You also need a basic knowledge of financial terms and the ability to read financial statements. You wouldn’t fly a plane without knowing how to read the gauges – and the same applies to business. You can’t tell if you’re winning or losing if you don’t understand the controls. Being able to read a balance sheet, income statement and cash flow statement means you’ll be able to participate fully in conversations about how to make a profit.
2. CREATE A BUSINESS MAP
You won’t be able to get where you’re going if you don’t have a map to get there. Every successful business starts with a plan – or even better, a business map. A business map is more than a way to get from point A to point B. It incorporates different scenarios so that you’re ready for anything, then connects it all back 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 start improving your quality of profit ratio? Working with a business coach can also be an invaluable tool in this stage as they’ve helped countless others create a plan that is sustainable and scalable.
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. If you think this way – in terms of creating a profitable business through massive growth from the get-go – you’ll miss out on opportunities along the way and quickly become overwhelmed.
Instead, think in terms of incremental growth. Set SMART goals – Specific, Measurable, Achievable, Realistic and anchored within a Time Frame – and focus on improving your processes and systems and steadily increasing profits over time. Everything in life that’s worthwhile takes work. Don’t be distracted by “quick fixes” or get caught up in a competitive race. Focus on long-term growth and what’s right for your business.
4. IDENTIFY WHAT’S HOLDING YOU BACK
As you’re wondering how to make a profit, you must take an objective look at your entire organization. What’s currently preventing you from making the money you know you’re capable of earning? 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 could also be something within you: Are you emotionally holding on to something that’s limiting your company’s growth? Have you held on to limiting beliefs? Once you’ve identified what is holding you back from your plan to increase profit, you can seek out the personal or professional tools needed to break through your barriers.
5. HIRE RIGHT
Tony always says to focus on your strengths, and hire for your weaknesses. Identify your own personal strengths and learn how to leverage them in leadership. Then identify your weaknesses and determine who you need to hire to fill those gaps. Perhaps you need an accountant or bookkeeper, or an incredible sales team.
You also want to hire raving fan employees. Who supports you 100%? Who not only knows the company inside and out, but can also rally the troops and bring in new customers? When you assemble a team of people who are excited to work for your brand and spread the message, it becomes much easier to be successful.
Finally, think about how you can better retain your existing employees. Do you need to hire fresh talent? Do you need to offer more benefits or make changes to the company culture? Do you need to invest more in your employees’ well-being? Find the right mix of leadership, inspiration and incentives, and you’ll find the key to how to make aprofit in business.
6. ADD REAL VALUE FOR YOUR CUSTOMERS
How do businesses make money? The most important answer is that they always add real value for their customers. The bottom line for how to make a profit isn’t actually a number – it’s the value customers perceive in the business’ product. When someone finds a product that fills a need they can’t find anywhere else, they fall in love.
How do you truly add value your ideal customer can’t ignore? Prioritize your market research to understand your customer’s lifestyle and taste. By inhabiting your customer’s mind and preferences, you’re able to create compelling innovations customized to your market. As you innovate, track how your buyer responds so you can adjust your strategy as needed.
7. FOCUS ON STRATEGIC INNOVATION
There aren’t many companies who can say they honestly offer their customers something brand new. Those that do are true disruptors, but that doesn’t mean you have to be that type of company to increase profit. At this point, successful businesses expand on existing ideas, but they do it in a way that’s useful and appealing to their customers. In other words, they strategically innovate. To do this, you need to identify who your customer really is and why they need your product or service.
An example of a strategic innovator is Netflix. Before the streaming service came along, people were happy to rent tapes at Blockbuster. Netflix saw how they could capitalize on this need for home entertainment, and found a way to make movies even more accessible for their target audience.
Netflix not only found a way to make a profit, but also a way to change the entire entertainment industry. If you’re able to do this, you’ll be leagues ahead of your competitors and can expect your profit margins to rise accordingly.
8. LEVERAGE YOUR CONNECTIONS
Running a profitable business requires far more than just number-crunching and managerial savvy. Like most of life, business success hinges on many factors, and building connections is one of them. Look at your network not as a collection of individuals, but as a collection of strategic alliances.
Build relationships with complementary businesses in your industry, and consider partnering with them for referrals. By learning to leverage your connections, you increase your scope and 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’re engaging your target market. There is no one-size-fits-all sales or marketing strategy, and you must 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. You might consider adding interactive tools like webinars and demos to attract customers.
To make a profit, think outside the box about your product. You might need to cross-sell (provide new products or services that complement your existing ones, like a gym selling supplements), or adopt a sales model that creates returning customers (e.g. monthly service plans or bulk discounts). Whatever approach you take, measure your results to determine what tactics are working and which ones aren’t.
10. TAKE MASSIVE ACTION
Once you’ve figured out what’s holding you back, how to grow and how to strategically innovate, it’s time to get to work and make your plan for how to make a profit. Create a timeline and develop a series of steps you and your team will take to increase profit margin.
Then make a massive action plan that will help you jumpstart growth and increase profit at your business. Maybe this involves creating a new department, launching a new marketing campaign or undergoing leadership training so you’re better equipped to lead your company. Whatever you need to do, make sure it’s included in your plan and that you have concrete, achievable goals for your company.
11. TRACK YOUR PROGRESS
Just because you’ve created 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 make a profit in a sustainable way? Set times that you’ll check in with your team and reevaluate your progress. Maybe this is a monthly thing, or perhaps you check in every three or six months to monitor growth.
Tracking your progress allows you to evaluate what’s working and what isn’t, refine your strategies for making a profit and gather feedback from your employees. If you’re consistently missing your goals, is it because they aren’t realistic? Or because you’re focusing on the wrong areas? If you’re achieving your goals easily, you can ramp up your goal-setting – and your profits.