Building a profitable business doesn’t just happen. You might have the most innovative products or a service that’s in demand, but unless you manage everything correctly and market your business well, you won’t succeed.
Too many business owners take a haphazard approach to running their enterprise; operating their business by the seat of their pants without adequate planning. They go from crisis to crisis, unable to get a handle on building toward long-term success. Here are some problems that happen when you don’t have a plan to succeed:
- You don’t have systems in place to manage their cash flow.
- You assume customers are going to come to them, instead of making an effort to market the business. The notion that the world will beat a path to your door if you build a better mousetrap is hogwash. \
- These owners pay no attention to customer service; struggling just to handle what needs to get done before the end of the day. They don’t build contingencies for when something inevitably goes wrong.
Make any of these mistakes and you’re in trouble; make all of them and it is game over.
Having a dream and being willing to work hard is not always enough. Here are a few steps for building a profitable business.
1. Commit to your dream
There are plenty of people who have a vague dream of owning a successful business, if only they had the time, money, or support to make that dream a reality. Unfortunately, dreaming of success won’t make you rich. You need to commit to making your dream come true.
Careful, thoughtful planning based on extensive research (about your competition, your target market, and economic conditions, for instance) makes success more likely and helps you manage day-to-day operations without going from one crisis to the next.
2. Hire the right people
No man or woman is an island and almost no one has all the skills, time, or aptitude to do everything necessary for building a profitable business. Sure, the founder may start off doing everything at first, but soon he or she must hire new employees to support continued growth. Just as it takes a village to raise a child, it also takes a team to build a successful company.
Look at your skillset. It’s doubtful you are a polymath. Very few people are. Most of us are talented in one or two areas but lacking in others. So, if you excel at sales and marketing, but suck at math, hire someone who is a whizz with numbers to take care of the financial side of things. And if your area of expertise is programming rather than admin, make sure you have a good administrator to take care of the day-to-day running of the business.
Hire professionals, pay them well (even if that’s just in ownership in the beginning), and respect their expertise. Don’t go cheap by hiring employees who lack the necessary skills for building a profitable business.
3. Give key players a stake in the business
With the right people on board, success is more likely. But you can’t expect talented, hard-working employees to stick around unless you show appreciation. As well as treating them with respect, consider letting senior people buy a stake in the business. By aligning their goals (ie. profit sharing) with those of the company, you’re on your way to building a profitable business.
4. Invest in marketing
The world is a big place, and unless you have a global brand, your reach is limited. Before prospective customers buy your products, they need to know you exist and that your products are superior to existing brands.
This is where marketing pays dividends. Regardless of your industry or where you are in establishing your brand, marketing is critical. From online marketing to local advertising, think carefully about how to target your customers, what appeals might drive purchase. But, marketing is more than advertising. Good marketing involves considering the 4 Ps of product, price, and place (distribution) in addition to advertising. Create a strategy and adjust that strategy based on key metrics to optimize returns.
5. Plan for sufficient funding
Business funding is very important. Without sufficient funding in place, you can’t handle day-to-day operating expenses or grow the business when the right opportunities come along. More businesses fail due to cash flow problems than sales problems, so plan for funding to keep the business afloat. Even established businesses need funding to cover slow periods or fuel growth.
Have a business plan. Make sure it accounts for every eventuality, including unexpected expenses. If you prefer to retain control of the business, apply for a business loan, but be willing to hand over a percentage of your business in return for outside investment. While you give away a share of the company to investors, their money helps fuel growth without taking away precious profits to repay loans. Investors also have expertise that is invaluable to business owners.
Stay in control of your finances. Run regular cash flow forecasts to stay on track. Use your business plan as a blueprint for future development, but don’t be afraid to deviate from it if things change. Simply update your plan and continue moving forward.
6. Monitor business expenditures
There is an old saying: watch the pennies and the pounds will take care of themselves. A wise person always does this in business. Instead of renting a premium office in a luxury development in the belief that it will impress clients and raise the business’s profile, keep your costs as low as possible until the business can afford such luxuries.
Negotiate better prices with suppliers and hire freelancers rather than employees for some areas of the business. Renting rather than buying, whether it’s people or other expenditures is the hallmark of lean and agile processes that are key to building a profitable business.
Monitor everyday expenses such as office consumables, utility bills, staffing costs, etc. Why pay more than you need to? For example, you can use a business electricity comparison site to find the cheapest deal on your electric bills, which is critical if your business consumes a lot of electricity.
7. Never lose sight of your end goal
It’s easy to get sucked into the daily grind of running a business and fail to see opportunities for long-term success. Make no mistake, building a profitable business involves constant planning for the future and many years of grinding through the day. But keep your end goal in mind and stay focused. You can do this!
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