You might be in business because you’ve always had a knack for practical thinking, or because you enjoy positions of leadership, or because you want to build and work with your own team of people. But at the end of the day, your business exists to make a profit, and how effectively it makes that profit will determine how successful it eventually becomes. If you don’t turn enough profit, your expenses could overtake your revenue, and there’s no upper limit to how much you can make.
Most people realize this, and strive to make their businesses profitable, but they still end up sabotaging their own profitability without realizing it. Check your operations and see if you’re making any of these profitability-crushing mistakes:
- You’re charging too little. For starters, it’s possible that you’re charging too little for your core products and services. There’s no easy way to tell this on the surface, but if you do some extra research, you may find that you can afford to charge more. This is especially true if you’ve been around for a while and you haven’t gone through any cost increases; scope out the competition and see what they’re charging for the same products. Can you squeeze in a higher markup, and justify that price increase to your current customers?
- You spend too much time on things. When you’re looking at the bottom line for your company, you tend to compare the raw dollar value of your expenses to the amount of money that’s coming in. This is good, but it draws your focus away from a key area of expenditure: your human resources. Every minute you spend in the workday is valuable, and if you spend too many of those on tasks that don’t matter, you’ll be wasting money and losing out on potential business development. Take a hard look at how you choose to spend your time (and how your employees spend theirs) and see if you can make improvements.
- Your workflows are inconsistent. Your standard operating procedures (SOPs) and workflows are cornerstones in the ultimate productivity (and thus, profitability) of your business. If they’re inconsistent, or worse, they aren’t formally documented, you’ll have trouble establishing any kind of familiar or effective work pattern. Take the time to document your processes formally, and make sure all of your employees have access to the completed materials. This will help you run a tighter ship, and identify any flaws in execution sooner and more effectively.
- You’re investing in the wrong human resources. You might be paying your staff too much–but there’s a reason I worded this entry differently. When it comes to human resources, it’s not a matter of how much you’re spending, but what you’re getting for that money. If you pay two people the same salary, but one performs like a rock star and the other barely meets your minimum standards, there’s an efficiency problem in HR. Make sure the people you hire are worth what you’re paying them, and if someone is consistently not pulling their weight, don’t be afraid to let them go.
- You lose focus when you get busy. It happens to the best of us at times. When you’re overwhelmed with tasks, new clients, and new orders, it’s easy to lose track of things. Your processes break down, your time management decays, and everyone runs around like headless chickens. Your busy times are critical moments for your business, so it’s essential that you maintain your productivity even then. If you lose your focus and the structure of your business unravels, you’ll generate less profit for every deal or sale you make.
- You aren’t experimenting. Your business’s performance is going to vary in many areas, from the return on your investment (ROI) in marketing campaigns to the productivity of your staff. There are two things to understand about this. First, things are always changing, and second, there’s always room for things to be better. Accepting those two truths, you should be prepared to experiment on a constant basis, trying out new strategies, new angles, new products, and new ideas. Not all of them will work, but even if some of them do, you’ll gradually refine your business to become leaner, less expensive, and capable of generating more revenue.
Any one of these mistakes could interfere with your ability to generate as much profit as possible, but stack them together and you’ll be forging a path to disaster. You owe it to the longevity of your business to track down and eliminate these profit-stealers as quickly and efficiently as possible. That doesn’t mean you should turn your business into a soulless, profit-seeking machine, but it also means you shouldn’t pass up the opportunity to make a few extra dollars when you can.