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Plugging Profit Holes

May 5, 2016

Business wisdom and inspiration for women entrepreneurs and small business owners

water is coming out of a bucket with holes

As I listened to a woman entrepreneur who runs a million dollar in sales company talk about ways to keep a business afloat in difficult economic times, the word “profit holes” was introduced to my vocabulary.

The speaker discussed how small businesses are threatened by profits holes that undermine their business by sucking out hard-earned profits. Most business owners can identify large profit holes and stop them pretty quickly because they create a lot of attention that cause an obvious impact on the survival of the business.

But most companies can’t or don’t identify small profit holes or money that trickles out every month. Taken individually, none of the small holes have a tremendous impact on the business, but collectively, they amount to a small fortune.

No matter if you want to double your profits or at least starting making a profit, identifying and plugging little profit holes within your enterprise will help you greatly. Here are some suggestions for identifying and dealing with profit holes:

* Produce a monthly Profit & Lost Statement which shows every dollar spent within the month. Make sure to analyze spent money within the business. Compare monthly P&L statements to make sure costs aren’t rising. Make adjustments where necessary. Ex: A couple years ago, I spent $8,000 on roses for my events. Never realizing how much money they were costing me, I have adjusted my floral selection and quantity to significantly reduce that cost without getting rid of the expense completely.

* Challenge yourself to find opportunities to increase pricing; even if it takes you a little bit out of your comfort zone. Consider raising prices to afford specific profit holes. Most entrepreneurs are fearful of raising prices. Even a small 3% increase in price might be enough to make your company more profit.

* Set new revenue savings goals while you are plugging profit holes. Remember every single dollar in reduced expense equals a dollar for dollar increase in your profit. Savings can carry over year-to-year which further compounds the return on your investment.

By dedicating time, focus and control over your expenses should increase your company’s profit and value. Make it a priority starting today.

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2 Comments leave one →
  1. May 5, 2016 9:35 am

    Keeping track of your money is so crucial for any business, but especially for a small business. Even the smallest “profit hole” can cripple a small biz. Thanks for the reminder!

    Like

  2. May 5, 2016 9:40 am

    So true Kimberly. I think we rush around with many other business priorities instead of “analyzing” our business to make it more profitable. Focus and attention to financial issues really can make a difference.

    Like

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