1. Focus on profit

As a business owner, you need to focus your efforts on increasing profits. First, create a profit plan to ensure you have clarity on what you want to achieve during the financial year. This includes setting a target for each month and trying to reach or exceed that number. Then complete your accounts monthly and regularly assess how you’re tracking against your goals. Making profit means making good choices all year, not just at tax time.

2. Improve your margin

Your margin is what you make after you’ve paid for your product. For example, if you buy shoes for $40 and sell them for $70, your margin is $30 or 43 percent. The margin is calculated before you pay for overheads, such as rent and insurance. Try to improve your margin by considering the following:

• Can you get rebates or a better price from your suppliers?
• Can you make bulk purchases and get a discount?
• Are there alternate suppliers that offer cost savings?
• Can you increase your prices to improve your margin? Often a small increase of $2 can help.

3. Minimise overheads

Overhead costs are another area of business that’s within your control. Look at your profit and loss report to carefully consider where you can make significant cost savings. For example:

• How much are you spending on stationery each month?
• Can you reduce rent by working out of a smaller space?
• Do you have the right amount of employees to run the business, or have extra resources crept in over time?
• Are your salary, bonus packages and commission aligned with profits?
• To save on printing costs, can you create digital copies of all internal and marketing materials?
• Are you paying for advertising that isn’t providing a return on investment?
• Do you have too many vehicles in the business and paying too much in Fringe Benefits Tax (FBT)?

4. Set sales targets

Sales is probably the most difficult area to control in business, but there are a few things you can do to make the most of every opportunity:

• Set monthly and annual sales targets. If you have a sales team, make sure you set their targets higher than your budgeted sales.
• Be smart about how you package your products or services—be careful about giving things away or your margin will suffer.
• Be proactive about sales and work with your team to brainstorm how you can win more business.
• Focus on what you do well and delay branching out into new distribution channels or products until you’re confident that it will increase profits.
• Stay on top of the latest trends in marketing and sales, including social media. Make sure your website is working hard to attract new leads and converting them into enquiries or sales.
• Remember, it’s not a sale until it’s paid! Monitor your debtors days and collections to maintain cashflow through your business.

5. Be proactive

Finally, don’t sit back and wait to see how the year pans out. Start being proactive about every area of business and use the skills and knowledge of your team, individual employees, advisors or even just yourself to improve your business over the next 12 months. 

Do you have any tips for running a successful business? Which area do you find the most challenging?