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Dont_Wait_for_Tax_Time_to_Look_at_the_Bottom_Line
| Dont Wait for Tax Time to Look at the Bottom Line
A curious thing happens to entrepreneurs in the spring of every
year. They wake up one day and realize they had better figure
out how much money they made last year so they can pay their
taxes. But wait, shouldn't a business owner already KNOW how
much money he or she made last year, last quarter, or last
month? If you don't keep track of how much money you're making,
you have no idea whether your business is successful or not. You
can't tell how well your marketing is working. And I don't just
mean you should know the amount of your total sales or gross
revenue. You need to know what your net profit is. If you don't,
there's no way you can know how to increase it. If you want your
business to be successful, you need to make a financial plan and
check it against the facts on a monthly basis, then take
immediate action to correct any problems. Here are the steps you
should take: Create a financial plan for your business. Estimate
how much revenue you expect to bring in each month, and project
what your expenses will be. If you need it, get help from
business planning books, software, or an accountant. Review the
plan monthly. Even if business owners take the time to prepare a
financial plan with profit and loss projections, they often let
it sit in a drawer. It's not enough to have a plan -- you have
to review it regularly. Remember that lost profits can't be
recovered. When entrepreneurs compare their projections to
reality and find earnings too low or expenses too high, they
often conclude, "I'll make it up later." The problem is that you
really can't make it up later: every month profits are too low
is a month that is gone forever. Make adjustments right away. If
revenues are lower than expected, increase efforts in sales and
marketing or look for ways to increase your rates. If overhead
costs are too high, find ways to cut back. There are other
businesses like yours around. What is their secret for operating
profitably? Think before you spend. When considering any new
business expense, including marketing and sales activities,
evaluate the increased earnings you expect to bring in against
its cost before you proceed to make a purchase. You can often
increase your profitability simply by delaying expenses to a
later month, quarter, or year. Don't be afraid to hire.
Retailers and restaurateurs wouldn't consider operating without
employees, but many service businesses limit themselves by being
understaffed. Almost any business can benefit from hired (or
contracted) help. Business owners can often better use their
talents for generating revenue than for running errands and
filing. Pay yourself a regular salary. If you are incorporated,
you may already be doing this. If not, allocate an amount to
owner's compensation on a monthly basis. Each month that your
business meets its profitability goal, pay yourself the full
amount. When you miss your target, dock your "pay" and when you
exceed it, pay yourself a "bonus." Writing yourself a monthly
paycheck will give you a strong incentive to keep your business
profitable. Evaluate the success of your business based on
profit, not revenue. It doesn't matter how many thousands of
dollars you are bringing in each month if your expenses are
almost as high, or higher. Many high-revenue businesses have
gone under for this very reason -- don't be one of them.
About the author:
C.J. Hayden is the author of Get Clients NOW! Since 1992, C.J.
has been teaching business owners and salespeople to make more
money with less effort. She is a Master Certified Coach and
leads workshops internationally. Read more of her articles or
subscribe to her free newsletter at http://www.getclientsnow.com<
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