It’s a common business tradition for company leaders to consider how to improve profitability at the start of a new year. Now that 2018 is here, you may find yourself pondering this as well. One important thing to remember is that the size of your company doesn’t determine its success. Even a business that invoices $1 million dollars a month won’t generate any profit if its accounts payable exceeds that amount. As you plan your own company’s financial strategy this year, keep the three tips below in mind.
Target New Customers from Limited Industries
As any business owner can tell you, the time spent directly producing a product or service for a customer is billable time. The time spent on administrative tasks, such as marketing to find new customers, is not. The key to success in 2018 and beyond is to spend as much time as possible on billable tasks. The problem that most small business owners run into is feeling that they must market to as many industries as possible to remain competitive. This simply isn’t true.
According to the online magazine Entrepreneur, it’s a better use of time for solo and small business owners to focus their marketing efforts on just one or two industries. This approach offers many benefits, including earning a reputation as an industry expert, more referrals, and ultimately, higher profitability.
Don’t Start Any Work without a Down Payment
Customers who pay slowly or not at all obviously do nothing for your company’s bottom line. Not only does your business go without much-needed income, but you or someone you assign must take valuable time trying to collect on past-due accounts.
The easiest way to put a stop to this cycle is to require a down payment before purchasing any supplies for the customer’s job or providing any type of service. If your company sells products, don’t accept a large order on credit from a first-time customer. Unfortunately, it’s a common tactic of financially troubled businesses to order as much as possible from any company that acts desperate to make a sale with no plans to pay the invoice later.
Stop Offering Unprofitable Products and Services
Sometimes business owners attach sentimental value to a product or service that they couldn’t justify selling otherwise. For example, assume you run a small travel agency and a certain travel package sold extremely well when you first opened five years ago. You associate that product with the excitement of starting your company, yet it has brought in less money each year and now actually costs your travel agency money to offer it. It’s time to get ruthless and simply stop selling anything that doesn’t turn a respectable profit. You can repackage offerings if you must, but don’t ignore the obvious any longer.
Palmetto Payroll Services is happy to brainstorm additional ways your small business can improve revenue this year. Please contact us at your convenience to request a consultation.