Sound familiar? You’re doing everything right for your small business – growing your client list, rocking your social media, putting in the work – but your end of month cash doesn’t show it.
What’s the deal?!
You may not be focusing on the one thing your business needs to grow: profit. Profit is what’s left over from your sales after you’ve paid all your bills. And it sure can be hard to make that number grow without the right mindset!
Luckily, you’ve come to the right place. I have over 20 years of helping businesses achieve their profit goals. These are some tips for how to make sure you always turn a profit.
Let’s dive in!
Properly price your services
One of the most frequently asked questions I get is how much should I charge for my services? You may be scared to charge a high price for your stellar services. You don’t want to scare away potential clients after all!
But charging too low will cut into your profit margin. And we’re here to learn how to always turn a profit!
Don’t undersell yourself
Get in the mindset of viewing your services as value-based rather than price-based. Take the time to analyze your services to see how they bring value to your clients.
Striking that balance between competitive pricing and earning a big profit is key to the success of your service-based business.
Still struggling to find that balance? Check out my article on how to calculate how much you should be charging for your services.
Make profit your priority
This seems like a no-brainer, right? If you want to always turn a profit, you have to focus on the profit!
But I see a lot of people focus on adjusting their expenses instead of their revenues. On one hand, it makes sense – lower your expenses and you’ll have more cash left over for your pocket. But what happens when you run out of costs to cut?
Switch your mindset from penny pincher to goal setter
Mindset coaches know that worrying over your flaws instead of obsessing about your strengths is NOT the way to live. Instead of fixating on your cash outflows, take a hard look at those cash inflows.
But how to do this?
It’s definitely important to make sure you are not overspending on frivolous expenses. For example – if you are a graphic designer with a tight budget, you may think it’s wise to use free unlicensed graphics instead of splurging on that top tier stock photo subscription.
But is it really the best choice?
How much more value can those improved graphics bring to your designs, your clients, and your business?
Write down a list of all your regular expenses and calculate how much value they bring to your enterprise. The value-add from that monthly Canva subscription might be worth double than you’re paying!
Set value-add goals for each of your big expenses and see how much more profit they can earn you.
Pay yourself first
You’ve heard the old adage of “pay yourself first” when talking about your personal budget. Before you spend all your dollars on your debt, put some aside for savings.
But what about how to apply that to your business?
Whether you’re a seasoned lifestyle coach or brand new entrepreneur, YOU should come first when it comes to your budget.
And by YOU I mean your PROFIT.
Profit first, expenses later
Introducing: The Profit First Method!
This new business mindset, first conceived by mogul Mike Michalowicz, turns the old profit formula on its head by making YOU the priority in your business.
The old profit model makes expenses your top priority by placing them first in the equation:
Sales – Expenses = Your Profit
The Profit First Method puts your profit front and center!
Sales – Your Profit = Expenses
In order to always turn a profit, you need to make sure your own needs are met to be able to give your small business the attention it needs.
Start by assessing your business’s cash inflows and outflows. This will give you a good idea of the current state of your business for the next step.
Next – split up your financials into the 5 Profit First Current Allocation categories and figure out what each category represents as a percentage of your revenues.
Here’s an example of a Current Allocation breakdown for a client who offers 1-on-1 coaching:
- Income – 100%
- Profit – 20%
- Your (Owner) Pay – 10%
- Taxes – 20%
- Operating Expenses – 50%
Once you know how much of your income you are putting towards each of those categories, you can calculate where you want your 5 Target Allocation percentages so that you are prioritizing your profit.
Here’s that same coach’s percentages with the new Profit First mindset put in place:
- Income – 100%
- Profit – 5%
- Your (Owner) Pay – 50%
- Taxes – 15%
- Operating Expenses – 30%
Now that she has a clear picture of where her financials need to be, that coach can start working on making her profit her priority.
Not sure where to go next?
I’m ready to help! Book a discovery call with me today and I can help you learn how to always turn a profit.
Disclaimer: While we love Mike Michalowicz and Profit First, it is not something we implement at Balanced Office Solutions. We work to ensure you turn a profit with every sale but often times we find a more personalized approach is best. If you would like a plan that is tailored to your business, we recommend reaching out to schedule a consultation.