From the outside looking in, running a business seems easy. But don’t let social media fool you; it’s hard. It can be even harder to run a profitable one.
There are many things that you need to be aware of and stay on top of to ensure your business is a profitable one. Here is a list of the top five things that can kill your profitability.
When running a business you have to be certain to hire the right people. These people should not only possess the technical skills required to do their job, but they should also believe in and be passionate about the type of work you do. They should also share the same core values that you have established for your company.
In addition, you need to make sure to have the right people in the right seats. Hiring someone to perform a job that is not their strongest skill set can be detrimental to the success of your company. Because poor performance leads to inefficiency and low margins.
Selling things just to sell them is the worst way to start a business. You should be selling items that the market has a demand for. Do you see a constant need for something? Have you asked your target customer what they are lacking in the marketplace? These are the types of questions you should be finding the answers to, to ensure that people will buy what you are selling. If people are not buying then your profit will be next to none.
Pricing your products and services is not a task, it’s an art. If not done correctly, you could be selling hundreds and thousands of items and still netting a loss. When pricing your products or services you have to price them so that they cover your costs. This means you need to know what all of your costs are – direct, indirect and administrative. With services this is fairly easy to calculate. But it’s a bit more trickier when you sell products because you also need to know the number of items you need to sell before you turn a profit. If your costs are more than your sales every month, you will experience a net loss not a net profit.
Having a defined workflow process can turn your business into a well oiled machine. When you don’t have your processes defined and documented, your staff’s performance will be less efficient which in turn can cost you more money in labor. The result – a low profit margin. You can create your workflow process by documenting everything you do within your business step by step. Be as detailed as possible to ensure that anyone who walks into your company can perform their new job with ease. Keep it in a central location so that all staff can access them as needed.