Today I am talking about having a profitable business. To have a profitable business you need to know your numbers. Time again research shows those businesses who do not have a handle on their numbers are the ones who get into trouble. I know numbers can be boring but they are important. I look at mine weekly and monthly in my planner I have the target for the month. I reached that by knowing what I want to have at the end of the year. You need to know how many leads you need what they are worth. How well they convert. How do you get repeat clients? You need to think about referrals. What kind of lifestyle do you want? What do you need to live on these are all important considerations? When I started my business, I did work out what I needed to live on but from that point, I was not sure what to do to get leads. I had my website-built thinking that would help. Now I know that just because you build a website does not mean people will come and buy your service. They need to know you exist.
Point 1 You need to know where your sales are coming from which are the most profitable and where your expenses are going . For instance, my main sales are from supporting people with their CQC registration. However, I also have a e-learning platform client tend to buy these courses after they have bought my Registration service. I have levels of service so clients can buy the level that suits their budget. I have a name for each of these services and I can check the percentage of sales from each income stream.
Point 2 I have a handle on my expenses. I do a lot of personal development, so I have a high spend on training. But I do have a budget which I will not go over for the year. In the beginning, I made mistakes with going for any training without looking at how it fitted into my overall business plan. Now I use tools which help me to decide whether the course will be worth it or not. These could be free or paid for. The same principle applies. The time I give a course or webinar is time not spent in the business. So I need to know what my return on investment is.
Point 3 In terms of expenses I know each year I need to account for my accountant, Microsoft for business software, my subscriptions to other platforms. My membership for example of the ABM. I know how much this cost and what sales I need to generate to cover my expenses.
Point 4 Forecasts are also vital for your business so you can manage your cash flow and expenditure. If you want to grow your team you need to know how much you need to spend on recruitment
Point 5 There are some key indicators you should be looking at. These will be different for different business. However, some of these should at least be a focus;
Number of new customers
Numbers of retained customers
Customer feedback I use Google Reviews as it can be seen by anyone who Googles my business.
Conversion rate so how many people who sent an enquiry converted to a sale. What did you do? I also know that those with whom I have a telephone or zoom call convert better than those with whom I just have email correspondence. The zoom calls convert the best this is because they get a chance to meet me even if it is virtually. I also know those who receive my book convert better as they have a chance to get to know me by reading my book.
It is key to know where customers come from and the conversion rate. If you have a referral system how does these convert? Do you have a loyalty scheme? For instance, a podiatrist I know gives a discount if you block book treatments. This s good for them because they know how many appointments, they have on their books in advance plus they get paid upfront so that helps with cash flow.
To help me keep an eye on my numbers I use electronic accounting platform. I used to have a Simplex D book, then I moved to a spreadsheet, but it was too cumbersome. I was so pleased when I finally moved to an accountant who used an electronic platform There are different ones I happen to use QuickBooks because that’s the one my accountant uses. My previous accountant used Zero. It depends on what your requirements are and what your accountant uses too.
About accountants you need to find one that not only prepares your year-end accountants but can give you guidance. I am on my 3rd accountant. The first one did not answer questions or sent me invoices for things without explaining what they were for. The 2nd accountant I could never get hold of. They never gave me any useful advice. Now, my 3rd accountant, I am so please with she understands what I need she guides me. She is on hand when I have queries and we meet quarterly so she can advise me. I have found having an accountant who gets me and my business is crucial.
The other thing most business forget to account for is what their time is worth. I know what my time is worth , how long it takes me to do certain aspects of the CQC applications. The number of telephone calls I end up giving advice on. The mentoring and coaching I do as part of the service. People pay for my knowledge and skills not just putting data into an application. Know what you are worth. You need to know what the cost of the equipment you use are too and the power they use if electrical you need to pay electricity bills. When I want to buy a new gadget my husband will ask me the wattage.
Do you know what all your costs are? I use stationery and ink I have IT expenses, Travel expenses on any given day I can check what percentage of expenses they make up.
Many new businesses do not pay themselves. But you do need to eventually so you need to know how much you lifestyle costs to enable you to work out what income you need what profit is generated to enable you to pay yourself the salary you need. You do need to look at forecasts to know if you are on track. You need to work out when you break even and when you make a profit and when you can pay yourself.
Do not be afraid to increase your prices. The right customer who values what you do will pay for the right service. Look at designer brands people pay for those.
To make sure I have a healthy cashflow I ask for payment upfront or for my long term programmes monthly. But this helps me with cash flow as I don’t have to chase payment. I have had debtors which I have had to write off and those who paid 50% after using a debt recovery agent. But to avoid those situations my terms are clear.
I work from home as I do not need to rent an office. I visit client sites when I need to this is a huge saving for me.
You need to know what your sales pipeline is. How do customer’s hear about you. How many enquires do you receive daily, weekly etc.
Referrals are a good way to receive business. I have this in place with companies who compliment what I do it works well because it’s a win-win for both parties.
Cash is king. You need to know when cash comes in and when it goes out of your business. A profitable business can have poor cash flow . So its really important to be able to look at your numbers and understand it even at a simple level.
That is why I like using QuickBooks on any day I can look on my dashboard and see my expenses, profit , cash flow etc.
I like to be effective with making sure my expenses are accounted for so when I post my books. I use receipt bank to take a photo this then goes to QuickBooks and I can throw the receipt away. This year with my accountant going digital I have too so I no longer need to keep a physical folder I used to. Now it’s all on my accounting platform. That has saved me the cost of a folder and its environmentally friendly.
If you like to stay analogue like my husband then use a Simplex D book and an A4 ring binder with the 12 month’s then for each month you need to put a copy of any expenses and what they were. Invoice to so when you give the folder to your accountant they have all the information they need. Also, keep your bank statements and the annual mileage in there.
I discovered a tool for forecast tracking it called Futrilihttps://www.futrli.com/pricing/
They have a free version which is always worth a try. It integrates with accounting platforms too.
My accounting platform gives me cashflow reports