Did you know that Twitter has never been profitable? Many businesses have similar stories. They aren't bringing in any profits. But, this doesn't have to be a permanent situation.
Here are five tips to implement to ensure your business is profitable:
1. Embrace Bootstrapping.
Modern life and advancements in technology has made many things possible. Elementary school students can now create a website for free. Stay-at-home parents can freelance for clients around the globe. Not all businesses can start with so little input, but try to use what you have. Starting a landscaping company? Consider using your existing tools and borrowing or renting ones that you don't have. As you profit, you can buy what you need and upgrade your old tools.
2. Determine How You'll Portion Out the Money You Take In.
If you only keep on top of paying bills as the money from clients comes in, it will be hard to get ahead. There's always another bill that will be due. If it's not your credit card, it’s your taxes. A great way to decide how to divide up the money is to use percentages. You may need to tweak these percentages to fit your business needs.
You might divide it like this:
- 10% Profits
- 30% Salary
- 20% Taxes and Business Insurance
- 20% Retained Earnings
- 10% Expenses
- 10% Growth
Create accounts for each of these funds at your bank. When money comes in, calculate how much needs to go into each account.
3. Set Aside Money For Your Profits First.
Similar to the religious tithe, set aside 10% of your earnings for profits. Let this accumulate and take it out once a quarter. Treat this like a bonus, since it's not your salary. If you don't stash it away first, you may never see profits.
4. Save For Taxes and Insurance Year-Round.
Taxes are due four times a year. Your business insurance might be due just once or twice a year. Divide each amount by 12 and then save that much into your target fund. Don't ever get caught without cash when April 15 comes around.
5. Cut Expenses.
Once you've figured out your ideal percentages, you might determine that there's not be enough money. It that’s the case, be ruthless on cutting extra expenses that don't harm your business. Do you really need to eat out every day, courtesy of the company? Can you buy generic office products? Maybe you need to change to a lower cost vendor.
This is a different way of thinking about your business income. This is not always easy to implement, so you should allow several months to fine-tune your system. But do try it. It works.
If you have questions about saving money on your business insurance costs, Fleming & Riles Insurance has answers. Contact us today for more information.