We make resolutions for ourselves in the New Year – to eat better, exercise more, and save money… but what about making business resolutions that will help your service business grow and put more profits in your pocket?
We often get so caught up in the daily ‘to-do lists’ at work, that we forget to stop, take stock of the past year (what went right, what could have been done better), and think about what steps could make a huge impact on the financial health of your business.
As a Certified Mastery Level Profit First Professional, this is my jam! So let me give you some New Year Business Resolutions you can use to kick start your new year.
1-Know Your Numbers
In my Profit Implementer and Profit Maximizer coaching programs, we spend quite a bit of time teaching our members how they can dig into the numbers of their businesses. Unfortunately, this skill isn’t taught at the local trade school or even in most college classes. Very few service business owners really understand the correlation between knowing their numbers and their bottom-line profit.
Your dollars need to count so you need to know how to count your dollars! (Especially now!) So knowing your gross profit, net profit, cost of labor, monthly break-even point, the profit margin for each job, projected income tax to pay, and more is KEY in making profitable decisions in the next year.
2 – Cut Unnecessary Costs
Another area that can result in a nice increase in bottom-line profits is knowing how much is spent on overhead expenses each month. In my coaching group, we use a tool called the Tool Audit as a way for our students to really take a hard look at what makes up overhead costs each month. During this process, they identify wants vs. needs and the frequency with which the item is used each month. This exercise makes it easy for them to identify costs that can be either trimmed or eliminated. It’s not uncommon for the students to find between $10,000 – $50,000/year in costs that can be trimmed or cut. So, deep dive into what profit is leaking from your business.
3 – Embrace Adaptability
Small businesses have a huge advantage over large businesses in the area of adaptability. It is so much easier for them to make changes and pivots fairly quickly and then take off and roll again. How adaptable is your business? What type of pivots has your business done over the past few years?
The mindset of “We’ve always done it this way” won’t work in this new recessionary economy. It may be time to make some changes.
4 – Niche Down
Develop a targeted customer or service niche and become a specialist instead of a generalist. Specialists always make more money/profits than generalists do.
Think about this in other industries – say the medical field. A general practice doctor makes a decent living but have you ever stopped to think about how much a neuro-surgeon or a heart specialist can make? How can you become the “neurosurgeon” in your geographic area?
When you “speak” to a targeted niche, you can become the “go-to” person for that group of people or for a specialized type of service. When you specialize, price ceases to become a competitive factor and value becomes the measuring tool.
Look at your top customers (the top 20-25%). What do they have in common? What jobs are more profitable, can you increase the amount that those top customers spend, and how do you get more of them?
5 – Make Your Marketing Dollars Count
When was the last time you really dug into your marketing and calculated the numbers to back up how money was being spent? Do you know which channels are producing well for your business?
Do you have a way to track the results received from each marketing channel?
Can you track the sales generated from each marketing channel?
What is the ROI on each of the marketing channels you are currently using?
Are there some channels that should be trimmed or cut?
Just a few questions you can ask yourself to audit your marketing.
6 – Review Your Short And Long Term Credit And Cash
Cash flow is the lifeblood of your business. How much cash do you have on hand? Many of the businesses I work with have decided they need to have 3-6 months of cash on hand to cover payroll and the necessary overhead expenses. Having this much cash in savings will actually carry them longer than just 3-6 months. We make the assumption that there will be some sales coming in but maybe not as much as you are used to bringing in each month which means the cash should last for 6-12 months (or even longer).
Figure out what credit cards need to be paid off, and what credit is available. Look into how many Accounts Receivables are open that can be collected, or leftover job materials that can be returned.
There are so many business resolutions that will help you be more efficient, create cash flow and lessen interest payments.