Wish your business could give you an additional income of $200,000 to $300,000 each year? This may seem difficult, but actually, it is not impossible to achieve. As an entrepreneur or a team leader in a company, all you need is to find ways to maximise your profit.
2019 is fast approaching, and that means you need to start planning for your business’ direction for the upcoming year. You need to identify strategies that can help your company increase it’s profit and gross. To help you with that, check out this list of tips:
- Have a compelling vision that inspires your team.
Creating a compelling shared vision for your team is necessary to enable you, as a leader, to guide them in a clear and exciting direction. If this vision is properly communicated to your team, this will energize them to run with you in accomplishing greater things.
Is it really possible to double or triple the revenue of your business in a year? Find out how business coach Nick Tang can help you increase your profit in 12 months’ time. If he was able to coach his clients into achieving this too-good-to-be-true goal, then he can surely help you too. Check this video out!
Defining the vision successfully will help determine the necessary tools, skills, technologies, and knowledge to get your business from here to there. Moreover, consistent promotion of a compelling vision can motivate your team and yourself to pursue your goals passionately.
What are the steps of creating an inspiring vision?
- Have a clear vision of your target destination– As what motivational speaker and author Simon Sinek says, “Vision is a destination — a fixed point to which we focus all effort. Strategy is a route — an adaptable path to get us where we want to go.” This means that you should know exactly what you want to achieve for the organisation so you can determine the appropriate strategies to get there.
- Define purpose– To inspire your team, you need to clearly communicate the purpose of your vision—why you want to reach that destination. Once you have convinced your team members why you need to achieve it, then it would not be too hard to push them towards your goals anymore.
- Believe in greater dreams– Dream big dreams and make them happen. Challenge yourself to aim for something higher than what you have already achieved in the past. Do not be afraid to take risks since it is part of an entrepreneur’s life.
- Set goals– Once you have your vision, you need to come up with specific goals that will help your team reach your desired destination. These goals must be aligned with your vision, and your strategies should help you achieve them.
- Come up with an efficient business plan.
A well-studied and carefully constructed business plan is necessary for your organization to run smoothly—with less calculated risks. The business plan does not only describe the business, but it also communicates its objectives, budget proposals, marketing strategies, financial forecasts, and sales.
With a business plan, your business idea will be described clearly; potential problems can be spotted; goals are set out; and progress will be measured. Your plan should cover goals for a specific duration, like 1 or 5 years.
- Set a few but clear strategic goals.
Goals are an important part of your business plan. However, too many goals can confuse your team and may only lead to frustration. Effective financial goal setting focuses on 1 to 3 targets only for maximum concentration and efficiency.
Your strategic goals should be SMART:
- Specific– The more specific your goals are, the better. For instance, instead of just stating that your goal is to earn more income than last year, you can make it more definite by targeting to earn an extra $200k in 2019.
- Measurable– The progress of these goals can be regularly monitored and measured. There must be criteria or tools of how they will be measured. Your team can use monthly or quarterly graph charts to monitor growths or declines.
- Attainable– Your team has the capacity and resources to reach these goals. Is it possible to achieve that goal within a certain duration, considering the capital, manpower, and skills that your company can provide?
- Realistic– Just like attainability, you must also consider the condition and capability of your organisation to see whether these goals are possible to achieve or not. They must be based on reasonable facts rather than pure dreams alone.
- Time-bound– Goals can be met within a specific duration, or there are target dates of completion. Setting end-dates for these goals should also be discussed properly and must be based on calculated timelines.
- Measure your financial performance.
Having a regular financial performance review is necessary to monitor business growth. With this, you can evaluate if goals are being met. This is an important part of financial planning or management.
To effectively carry out a financial performance review, you have to use appropriate financial measurements, such as financial ratios and budget vs. actual expenses. Other financial performance measures you can use, which focus on profitability, are:
- Profitability ratios
- Cost base
- Working capital
- Operating expenses margin
- Net profit margin
- Gross profit margin
- Return on capital employed
- Double or triple your revenue.
If you are desiring for a huge profit growth, then you need to prepare yourself and your team to create and execute bigger plans. Your faith in your capabilities is the limitation of what you can achieve. For instance, you may want to play safe by aiming for a 10% revenue at $500k, but if you are a risk-taker, you can target 10% at $5M.
The following strategies can help you multiply your revenue:
- Plan ahead- Do not wait for 2019 for your business’ yearly planning. Instead, together with your team, establish your next year’s business plan at least a quarter before the current year ends. Your goal should be to start acting on your goals on January 1.
- Develop multiple revenue streams– If you want to double or triple your revenue, then you need to have multiple sources through which revenue will come in. This could mean launching a new product, offering other services, or opening other stores.
- Offer rewards– Giving rewards to the employees who contribute to revenue increase will motivate your team to work harder. These compensations may be additional expenses, but they would definitely give you much more back.
- Maximise your capacity.
This includes creating systems to increase your organisation’s throughput and training your team members to increase efficiency.
Developing a business system will not only make the organisation organised, but it is necessary to create and scale the growth of your business. By systemising, delegating, and automating, your business will have leverage. In case your current system does not work, then it is alright to replace it with something that could be more effective.
Moreover, spending on your employees’ training will not only make them efficient, but it will also help your company develop leaders. Having several efficient leaders is beneficial since you can delegate more of your tasks to them, and when your business expands it’s territories, they can be assigned to supervise other branches.
- Review your business to find the profit leak.
In order to improve your business’ profitability next year, then it is necessary to figure out any possible profit leaks as early as now. What are those ways that your business leaks profit through? How can you avoid the same mistakes in 2019?
It is necessary to eliminate bad debts, map the business process, and evaluate the areas that can affect profitability. Here are some of the usual mistakes your business should avoid:
- No budgeting– Your business’ budget defines the expenditure and expected profit within a certain period, usually a year. If you do not want your business to leak profit, then one of the important steps to do is set the annual budget. This is one of the ways to control and manage the business’ money, so doing it properly can help prevent profit leak.
- Neglecting overheads-To make more than minimal profit, make sure that you do not only focus on the gross profit margin when calculating the prices. You should also set an amount for overheads or fixed costs.
- Failure to review financial reports– Not reviewing your business’ financial reports regularly may put you and your team in big trouble. First, your company has the legal obligation to keep business records, and without regularly checking on them, there could be missing files and record lapses that could cause you headaches. Moreover, regular financial updates will not only keep your company on track, but they will allow you to discover any profit leak as early as possible.
- Prepaid services– Issuing an invoice before receiving the product purchased or the service sought can also cause you profit leak. What if the job is not done or it is defective after the payment has been collected? To avoid this from happening, make sure that your company only releases payment based on terms agreed between parties.
- Spending money on waste– Without proper planning, your business could be spending on unnecessary waste. These could be things that are not really needed and do not contribute to increasing the business revenue. It could also happen through duplicate purchases or overpaying.
- Utilise efficient online marketing strategies.
Instead of spending a lot of money on traditional advertising, such as on television and print ads, why not market your product or service through more affordable means? With the fast advancement of technology these days, there are more ways to attract the attention of potential consumers without spending too much.
- Search engine– The Internet plays a big role in modern-day marketing. Most people can access Google on their cell phones, tablets, and laptops, so they use this technology to search for anything they want. Therefore, it is an advantage for your business to have a website so that your target customers can easily find you. Using search engine optimisation to boost posts about your business has a big impact too.
- Social media– Another powerful marketing tool these days is social media. Aside from creating business pages, you can also take advantage of trending topics to draw attention to your product or service. You may reach out or interact with users as well, which is an effective PR strategy.
- Blogs and reviews- These are informative write-ups that can influence the perception of readers or viewers. Asking a credible blogger to create a review of your product is a good approach since these reviews or blogs are not explicitly advertising.
- Find an expert.
Asking advice from specialists can also help your business avoid mistakes, like ineffective marketing tools and faulty sales forecasts. Experts can guide your team along the way, especially if you are new in the niche. Yes, you may have to pay, but getting a business coach will help you save much more in the long run by guiding your company to avoid problems and poor performance.
The following are the kinds of experts that you can tap:
- Consultants– They are hired for short-term services. Oftentimes, they are hired to help in specific areas like employee recruitment and computer networking.
- Business coaches– Unlike consultants, they are long-term advisors who can be counted on for strategies that are necessary to resolve business issues. They can also assist you in creating your business plan.
- Seminars and training– There are seminars and other kinds of training which offer business courses. Topics range from entrepreneurial skills to organisation management. You can also bring your entire team with you so that you can learn altogether.
- Self-help books and materials-You can also learn a lot about business through good books, videos, and other self-help materials. Many resort to these since they are more affordable than hiring an advisor.
If you are only starting with your business, or it has been up for a long time but profit is still low, then a combination of the aforementioned assistance can help you a lot. They will not only help you prevent mistakes from causing profit leaks, but they can give you ideas and strategies that are effective.
- Set up compelling reward programs that motivate your workforce.
Studies show that employee engagement has an effect on the production growth in an organisation. The more motivated the employees are, the more productive they are—and this is what your business needs if you want more profit. This means that you have to keep your team happy in what they do.
Furthermore, the company culture, which refers to the workplace atmosphere, plays an important role in keeping and attracting a competitive workforce. If your company offers a supportive and optimistic environment, then you can have a more stable team since people stay. On the other hand, if the company environment is critical, stressful, and degrading, workers will surely come and go.
In order to create a positive company culture, you should practice the following:
- Appreciate– Showing appreciation to your employees is not limited to saying “good job”. Recognising their efforts and positive contribution to your business must be done spontaneously and sincerely. Praising them both privately and publicly can boost their morale.
- Reward– Compensating your team for their jobs well done can motivate them to do even better. Therefore, you should create a praise system within the organisation, which includes both financial and non-financial incentives.
In order to maximise your business’ profitability, you should improve your management skills. This includes eliminating the usual organisation wastes that hinder safety and quality.
In organising your work area, you can apply the 5S philosophy, which is used to enhance productivity and efficiency. The 5S process involves sorting out the essential and non-essential things in the office and storing them properly; regularly maintain these things and the workplace; and creating a system of work standardisation.
To get rid of time and budget wasters, you and your team should brainstorm in business planning to make sure that everything included in the plan is essential. You must evaluate the past expenses, activities, and investments of the company, and find out which do not contribute to the achievement of the business goals.
- Less is more.
Many business owners are trapped in the mindset that more is better. For this reason, they try to offer as many products or services as possible. However, this is not advisable, especially if you are just starting your business, since the lack of focus on a product or service can cost it’s quality.
Many successful companies, like Apple, Yeti, and Lego, were able to push their brands up to the market because their products are limited. Instead of trying to look for other ventures, they focus on how they can improve the quality of their products.
This does not mean that you should not try other ventures. However, you should limit them to the products or services that you are passionate about so that you can still focus on them.
Hard work is not enough to earn that extra $200k to $300k next year. You also need the wisdom to apply the right strategies on how you can grow your business. Plus, you need to be patient, not just with the system, but even with those you work with.
If you need more ideas on how to maximise your profit, feel free to contact us.