“How do I make more money in my business?” is an age-old question that has been asked since the beginning of commerce.
We may have altruistic purposes or a strong internal “why” for why we’re in business, but at the end of the day, we are all in business to make money. How much money depends on what you need to be comfortable. That revenue number is different for all of us. Regardless of where we want to end up with our business financially, we all start in the same place, at least we should.
Anything that can be measured can be improved. The profits from your business are no different.
Making More Money: Have a Scaling Plan
If you have any hopes on growing and eventually scaling, you have to measure your business. Many times, owners notice issues with their business (especially when it comes to their cash flow) but don’t know where the issues are stemming from. If you don’t know where the issues in your business are coming from, you’ll never be able to solve it.
Tell me, how fun is it to find a solution when you don’t even know the problem? About as fun as trying to count the hair on your own head. Translation: not fun at all.
The bad news is that this happens more often than most business owners care to imagine.
The good news? There’s a solution for it.
The Importance of Measuring Your Growth
We kind of already spoiled the secret earlier in this post but the secret really isn’t a secret at all. If you want to know how much your kid grew during his first year of high school, what would you do? You’d measure your kid before they entered their freshman year then you’d measure kid on the last day of school (or the end of summer, depending what kind of parent you are).
Your business is the same way. You measure it at the beginning then periodically along the way. Figuring out how much your kid grew over the course of a year is pretty simple. You measure their height. Figuring out how much your business grew (or shrank) over the year isn’t as straightforward.
Measuring your kid’s height is figurately and literally and a linear process. Height is your only variable. Your business is a bit more complicated. In our businesses, we are often trying new things. A new sales process. A new marketing campaign. New employees. Sometimes even a new business model. With you imputing a bunch of different variables at the same time, it’s hard to measure the impact (good or bad) that certain changes had. You can’t grow your business without understanding the resulting of the actions you’ve taken.
So, what should you do?
Use KPIs to Make More Money
Establish KPI – your Key Performance Indicators. These will be non-financial measures of the quality of your output and the efficiency of the underlying processes in your business.
This means you should focus on the process. Trust the process. Allocate resources to move the needle to get the results you are looking for. Take for example your sales process.
When most business owners think of their sales, they’re only focused on their bottom line. The bottom line is obviously important, but focusing on it alone will not bring you any closer to growing it.
Instead, consider measuring your conversion rates. Your conversion rate is the percentage of visitors to your page that complete the desired goal. Your conversion rate tells a much deeper, complicated story then your bottom line.
After measuring your conversion rate, measure your average dollar sale per order. This will tell you how large or small your orders are on average. If your conversion rates are high but your average dollar per sale is declining, your sales agent might be giving things away or heavily discounting orders to make the sale happen.
Understanding those key performance indicators will allow you to either revamp your sales process or confront your sales team. Regardless of the course of action you choose, you’re now equipped with the data to make sensible choices regarding your process.
Conclusion: There is Strength in Data
Cleaning up the issues in your sales process will inevitably lead your business to make more money. Knowing your KPI’s then taking the correct action on them helps patch the holes that truly exists instead of your creating new holes just to patch them. Business owners often create issues for themselves that don’t truly exists in real life, but that’s a story for another day.
Indicators that track the health of your business. Don’t you want a healthy, profitable business?
Know your numbers. Know your cost. Know your margins. Know your profitability.
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