Building a business is an intensive process that often takes a great deal of time and effort. The average business takes 3 to 5 years to become profitable due to startup costs, construction, inventory and labor costs. Many of these initial costs are incurred before the business actually opens and during early stages of growth and marketing.For a while, maybe years, whatever money you make from the business will necessarily get reinvested into the business to pay for new inventory, labor costs, marketing plans, and loan repayments. So what can you do to become profitable more quickly as well as make sure you reach profitability rather than failing as a business?
Plan With a Budget
A budget is a plan for how your business should work. Such planning is necessary so that you know about how much you will be making and spending. Getting a realistic picture of your business finances allows you to determine what the business can and can't afford to spend money on so that you can make good decisions about how to run your business.
Budgets are crucial as a curb on unlimited spending by determining how much money the business can expect to make. Instead of just spending money because it's there, a budget will give you a bigger picture view of the business and help you line up spending with goals.
Track Income and Expenses
A budget is great, but it is theoretical in nature. As money is made and spent, it must be tracked so that you can determine whether the budget was accurate or needs to be adjusted going forward. The easiest way to track income and expenses is with computer software made for this purpose.
Analyzing the collected information can help you find areas where you may be wasting money or where you could make more money with some smart marketing. Most tracking software has report functions that will break down your income and expenses so you can see patterns and ways to improve.
Keep Overhead Low
One of the best ways to reach profitability is to cut waste to keep overhead as low as possible. Go over each spending category with a fine tooth comb and see where there is fat that can be cut. Maybe you can reduce your on-hand inventory by studying sales to see if you are ordering too much, or reduce staff by fine-tuning job duties so that employees can get more done in less time.
There are as many ways to cut costs as there are businesses, so with a little careful scrutiny, you should be able to find areas to cut that won't hurt the business but will help to increase your profits.
Spend Money to Make Money
Sometimes your analysis will reveal an equipment upgrade, new product or staff position that will significantly improve your business and increase your income. Finding the cash to make these moves can be difficult when you're not yet making a profit, however. In these circumstances, a merchant cash advance can give you the working capital you need to ultimately make your business more profitable.
Quikstone Capital Solutions provides merchant cash advances that can give small businesses the working capital to grow and increase their profits.
