The Business 360 Podcast with Rushab Kamdar

#26: How To Get Profitable

November 15, 2021 Rushab Kamdar Season 2 Episode 26
The Business 360 Podcast with Rushab Kamdar
#26: How To Get Profitable
Show Notes Transcript Chapter Markers

In Episode 26 of the Business 360 Podcast, I will highlight the 7 key areas that every entrepreneur should focus on to get their business to profitability.

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[00:00:00] Welcome to the Business 360 Podcast where we will take a 360-degree view of all things business in under 15 minutes. I'm Rushab Kamdar a serial entrepreneur consultant, speaker and business strategist. I help entrepreneurs and businesses get profitable while also saving them time, money and headaches.

[00:00:28] Hey, there are business heroes. Welcome to episode 26 today. We'll talk about getting profitable on. Yes. If you started or only business, then it's all about profits. Well, at least that's one of the reasons why we do it now. Here are some hard facts. Only 40% of small businesses are profitable. 80% of businesses that fail do so because of cashflow.

[00:00:55] 50% of businesses failed by the fifth year. So why don't we talk about how to get profitable? So you don't become one of these negative statistics. The two most common questions I'm asked is how do I get profitable and how do I improve my profit margins? See whether you are a new or established entrepreneur.

[00:01:15] These are questions that you should have top of mind. For me, there are seven areas that every entrepreneur should focus on when it comes to getting profits. But before we explore those seven key areas, let's take a minute and answer the question on why profitability matters. Aside from the obvious that being profitable keeps you in business.

[00:01:37] It also helps you with improving your existing. Or developing new ones or hiring a team or your marketing and advertising and even entering new markets. Also, if you want to grow or scale your business, you're going to need cash to do so you can, of course, always go out and get alone, but it's always better to avoid debt.

[00:02:00] So the first area I like to cover is what I call strategic implications. See most people. Having a thought that if you want to improve your profit, then focus on increasing your sales and finding a way to reduce your costs. As simple as that may sound, there's obviously a lot of nuances to it. See whether you are going to increase your sales or reduce your costs.

[00:02:26] You need to lay out a plan in order to implement this. A plan is just essentially a straight. The problem is that a lot of people will follow a plan to a T. And if it doesn't work out, they're left confused because in their minds, they're assuming that following a plan to execution should have a guaranteed result.

[00:02:47] So here is some advice that I would add to your list of mantras. If you have one strategy, our approaches not guaranteed. Now the flaw of most strategies is that they don't account for what I call second, third, and fourth implications of the original strategy. So let me give you an example to highlight what I mean, let's say you're launching a new, online digital course, and you want to start building a following.

[00:03:19] This means to have potential customers registering to your email list, joining a Facebook group. Following you on social media. And essentially just subscribing to the content that you're putting out there. And let's say that one of your strategies is to create a podcast as a form of content marketing.

[00:03:39] Now you put all this time and effort behind building and producing a podcast, but maybe you haven't taken a deeper dive on the implications of this strategy, both on the positive. And the negative side. So let's take a look at the positives. Your first-line strategy is building a podcast and the implications on the positive side is that you may have a high number of downloads.

[00:04:02] You'll start gaining a large following. There may be sponsorship opportunities that may arise, and you may get some new revenue streams on the negative side. The implications of this strategy is that you may have a low number of downloads and. It may take too much time to produce a single episode of a podcast, or you don't have any immediate revenue and possibly you're spending a lot of money on the equipment you're using to record your podcast.

[00:04:30] So if you look at each of these implications or factors on your original strategy and you take a deeper dive into it, it's going to help you better plan your next steps so that you aren't left in a situation where you're lost on what to do or that it can be very costly because now you plan. For what potentially can happen going towards this strategy.

[00:04:51] See, in order to be profitable, it's extremely important to do this strategic implication exercise. It's the exercise that is a core component in my own consulting, coaching, and online programs. And that's because it's one of the most important skills an entrepreneur should develop. And that's what I call building sound strategy.

[00:05:10] The next area is what I call understanding the numbers. There's a saying that I live by and that's always know your numbers. And even if you aren't financially savvy, it's still extremely important for you to be on top of your finances. At the very least on a high level, it's understandable that you may want to leave your finances to an assistant or someone else on your team.

[00:05:35] But in reality, until you're in a position to hire a CFO or an in-house bookkeeper, it's better that you're responsible in managing your finances. So how can knowing your numbers help you get profitable? Well, let's take a look at two scenarios. If your business is making a profit and if your business is not making it.

[00:05:54] If your business is making a profit, then it's important to know your profit margin. See profit margins, tell you how well your business is doing. Of course, the larger, the profit margin, the better you are at keeping our revenues at a good level and keeping your costs much lower. A lot of entrepreneurs, they don't compare their historical financials with the current ones.

[00:06:16] And if you don't do that, then you're not going to be able to see which trajectory your profits. Now if your business isn't making a profit, then it's even more important to dive into your revenue and your cost figures. It's important to explore what is your average, monthly loss. And also again, look at the historical trend of those losses and that's because you don't want to be in a position where you're continuously having losses.

[00:06:40] And then you get to a point where you run out of money and you have to close the door. So let's dive a little deeper on revenue and costs. Your revenue figures will help you recognize the consistency of your sales. See, by taking a closer look into your revenue figures, you possibly will discover that your pricing needs to be changed or that your sales are stronger during certain times of the year versus other times.

[00:07:03] And if you begin seeing a decline in sales, then it's possible that it's a marketing issue or that there's a problem with your sales funnel, or even that there's something wrong with the quality of your product. And finally, under the revenue side, when it comes to price, you want to make sure that you price your product or your service with confidence.

[00:07:21] I've seen too many entrepreneurs under priced themselves, and therefore they're just leaving money on the table, which of course is going to impact the profitability of the business under the costs of. Your cost figures should help you recognize your expenses and whether they're going crazy in any particular area of the business.

[00:07:38] See, for example, if your marketing costs have skyrocketed, but your revenue numbers have decreased. This probably signifies that either your marketing messaging needs to be changed or that you're targeting the wrong demographic. Cutting costs are not always easy, but understanding your cost trends is vital to maintaining or achieving profitable.

[00:08:00] The next area is product positioning, how you position your product is integral to sales. It's something that even the most experienced entrepreneurs struggle with product positioning is everything from what your product is to its branding, to its quality and to the messaging behind it. For example, let's say you own a consulting practice and someone asks you, what do you do?

[00:08:25] I'm going to give you two answers and it should be pretty obvious, which is the one that is positioned the best answer. One could be. I own a consulting practice that helps businesses with their strategy and operations and answer to can be. I own a business strategy consulting practice, exclusively helping companies and entrepreneurs go from seven figures in revenue to eight figures while setting long-term strategic.

[00:08:50] And a sustainable operational foundation to save management time and expenses. The second answer provides so much more clarity in the product offering along with a desired outcome for the business. I always tell entrepreneurs it's extremely important to set yourself apart in a way that any potential customer who comes across you immediately feels the value of your product.

[00:09:12] Offering product positioning is vital when it comes to making the sale and therefore helping you achieve profitable. The fourth area to help you get profitable is customer support. And that's because the support that you provide to your customers is the easiest way to get continuous sales, whatever lead generation or sales funnel that you create should be targeted to the most profitable customers, because they're the ones who will help you generate the highest sales and the highest profits.

[00:09:39] See if you're consistently there for these customers, their loyalty will bring in more sales and new customers to your. Then probably any other method out there. That's why so many businesses offer loyalty rewards and retention programs because they've recognized the value of repeat business from current customers.

[00:09:59] The two most popular ways to continuously sell to current customers is called ups. And cross sell. When you're upselling, it's essentially offering additional or premium products to your customers. Think about fast food chains or coffee shops, where the staff is offering you to up-size your food and beverage.

[00:10:18] And when you cross sell, you are selling additional complimentary or related products. So if you have an online business and you have a loyal following, then you can offer affiliate sales to other programs or services that you know can also benefit your customers. Now, if your customers purchased through this affiliate link, you will receive a percentage of the sales on businesses that are not online.

[00:10:41] A cross sell example would be selling coffee beans to a customer who bought a coffee maker, whatever strategy you choose. Customer support is a vital way of ensuring that revenue keeps coming in and therefore you can target profitability. Now the fifth area that I focus on to get my business profitable is my marketing and my sales strategy.

[00:11:03] There's a very interesting concept that I've been noticing, and it surprises me. There's a lot of noise on how entrepreneurs don't have to spend money on marketing and advertising. And there's so many people are told that organic marketing is the way to go. Now, while I don't disagree that every entrepreneur should have an organic marketing strategy, I have to tell you, it's still extremely crucial to spend money on paid ads, the caveat of paid ads.

[00:11:27] And for that matter, even organic marketing is creating the right marketing campaigns. Targeting the right customer segment and ensuring that the messaging is honed in to increase conversion. See, it's no secret that marketing is an important element to becoming profitable, but it only works if a sale is made, because that means that the marketing message is converting.

[00:11:48] So having a clear cut sales strategy, a proper sales funnel that works and a marketing campaign behind it is imperative to getting profitable. Another area that a lot of entrepreneurs struggle with in getting profits. Is streamlining their operations. See how you run your company is a key factor in whether your business can be profitable.

[00:12:09] Everything from your core functions, to your strategic initiatives, to your day-to-day deliverables and the team and support you have surrounding you is crucial to the bottom line. It's important to develop SLPs, which stand for standard operating procedures. It's important for you to implement automation, which removes manual work.

[00:12:30] And it's important for you to find the right help. So you aren't left doing everything by yourself. And when it comes to hiring the right team, you want to hire people who know what they're doing and love what they're doing. You also want to treat them well because a well-treated team that's appreciated will become your best brand ambassadors.

[00:12:49] Finally, make sure you empower your team because an empowered team requires less delegation on tap. Because there are more motivated to take initiative and do the core job functionalities that's required from them. And the final area to ensure profitability for your business is managing your lifestyle as your business begins, making money.

[00:13:10] What do you do with the increased cashflow? Are you reinvesting it back into your business or are you taking a larger personal income home? Unsurprisingly, most entrepreneurs will increase their personal income rather than reinvested back into the. Understandably, the entrepreneur believes that they should reap the rewards of their hard work.

[00:13:31] But unfortunately, one of the top reasons businesses not only lose profitability, but also fail is because the entrepreneur increases their lifestyle expenses resulting in the business, being cash strapped, and therefore struggling to operate in entrepreneurship. You need to be disciplined, especially early on.

[00:13:50] There will be a time when you can and should reap the benefits of your success. But when you are in growth mode, focusing on your business's upper direction should be a priority over buying a new house, a fancy car, or taking an expensive vacation. What I want your takeaway to be from this episode is that profitability.

[00:14:11] Isn't a one strategy initiative. There's so many factors that need to be addressed in order to get profitable. And that's why it's not so easy to do. I mean, there's a reason why so many businesses fail. If you want your business to succeed, then you're going to need to commit to that success. I laid out seven areas that you should focus on in order to get.

[00:14:32] And those seven areas will help you create a plan and a strategy. So be organized, be intentional and be methodical in your approach. And the rest should fall into place. That will just about do it for this week's episode. Be sure to join us next week, where we will talk about what if you own a business that you don't love.

[00:14:52] Thanks again for listening and you stay classy. Business heroes.