You’ve made over £1M. So why isn’t your business more profitable?
You’re brilliant at what you do. You’ve put hours – if not years – of hard graft in, honing your business offering and delighting your customers. Business has boomed and you’ve finally hit the holy grail of financial targets: £1M turnover, or perhaps significantly more.
And now your profits have stalled.
Don’t panic. You’re not alone. Owner-managed businesses that grow from zero to £1M struggle to be as profitable as they should be.
“But that doesn’t make sense. I’ve proved I can make the money – am I losing my touch?”
Absolutely not. It’s all about switching your focus; you’re so busy doing what you do that planning and strategy gets shunted down the to-do list. But if you’re serious about hitting that next million (and the millions after that) and enjoying all the pleasures of a profitable business, it’s essential that you block some time out and take a step back. If you need a push, here are a few questions to incentivise you:
- Has making your first £1M been everything you expected?
- Are you making as much money as you wanted to?
- Do you feel in control of your business and where it’s going?
And the killer question:
- Do you have the personal income to fund the lifestyle you want?
If you’ve answered no to any or all of the above – let’s get stuck into some simple, actionable steps to drive your profits in the right direction. I’ll start with a fundamental truth:
Knowing where your business is going is more powerful than knowing where it’s been
I’ll cut to the chase. You must have a budget. You must use it so that you know where your business finances are going as each month turns from a budgeted figure to an actual amount. If you don’t do that you don’t know if your business will deliver the profits you need it to.
Your budget is the tool that allows you to forecast what will happen in the future and predict your future profits. It’s also your early warning system if there are issues on the horizon.
“But I’ve already got a budget. Do I need to do more?”
Yes – because having a budget is just the first step. You’ve got to put it to work for you: Implement it, learn from it, adapt to changes in your business and flex your budget to make sure you stay in control.
Never had a budget?
No problem. The quickest way to get started is to run a profit and loss report for your last financial year. This will give you last year’s income and expenditure under each of the relevant headings. Download it to Excel, change the format and upload it to the budget manager in Xero (and if you’re not sure what Xero is – we need to talk).
Now you’re ready to compare what happened last year to what’s happening this year and adjust your numbers to predict what will happen in the months ahead. Tweak your numbers until you have what looks realistic. Remember to consider major events or changes, such as large capital purchases, staff changes, recruitment costs, R&D and investment.
Review your projected income
Will you make the profit you need to personally receive the remuneration you expected? Do you have the cash necessary to operate? If not, you can make changes. This isn’t a one-off activity. Now you have a budget you must use it. Review your numbers monthly. Compare income, expenses and net profit. Investigate anything that’s particularly good or bad. If the change is permanent (e.g. wages increase), update your budget. If you spot something unusual – perhaps your advertising spend is very low – check that you’ve posted all expenses to the correct account, as accuracy is essential.
Knowing where you are and where you’re going is the fastest way to peace of mind, not to mention protecting your profitability.
But that’s just for starters. If you’re a £1M business owner hungry for more ways to increase your profits, click here to download my free guide >> Why £1M+ Turnover Companies Are Less Profitable Than They Should Be
The fastest way to find out how we can help you to be more profitable is click here and book your free discovery call.