Sales Are Good. Where’s the Profit?

AUTHOR:

Do you ever feel like your business is leaking money somewhere? Your sales are good, but something just doesn’t seem to add up on the spreadsheet.

“Where are the profits? Why does it feel like we’re doing better than we actually are on paper?”

This is a very common problem we face in the world of small business accounting, so you’re not alone.

If you want to find a leak in the profit pipe, look for these common issues.

Your Prices are Too Low

This is a problem we face a lot when helping people with small business consulting.

As a startup or small business, you can often feel like your lower price is your competitive advantage over the bigger companies. This can be both true and untrue.

Price is a competitive advantage, but not a sustainable one. You may have zeroed in on buyers who are simply after the lowest price. But what happens when somebody comes in and offers a price even lower than yours. You’re definitely not going to want to get into an undercutting war.

When you are in Year 1 or Year 2, you may not really know what you’re operating costs are going to be, until the invoices start rolling in. It’s not uncommon to change your pricing structure during this time.

If you’re worried about losing customers with a price increase, remember, these customers would’ve been the most difficult to hang onto anyway.

You’re Being Dragged Under by Overhead

A lot of entrepreneurs spend money based on ambition, instead of reality.

Sure, when you’re running at full speed you want to have 5-10 employees and comfortable space to accommodate your staff. But do you need that today?

Unnecessary overhead costs are one of the most common small business accounting issues we flag.

Maybe you don’t need the big office space, just yet. Maybe you can get by with something smaller or more modest while you are building your team. There’s always room to expand later.

Trust us when we say it’s a much more rewarding experience to take a growing staff into a new building, instead of sitting in an expensive office space with a lot of empty chairs.

Too Much Staff

Maybe you don’t even need a full-time staff just yet. You might be able to get by with freelancers or people working on a piece-work basis while you’re growing.

Full-time employees come with lots of extra expenses on top of their salaries, like taxation, benefits, sick time, and equipment.

The average employee ends up costing you 25 to 40% more than their salary. So, somebody making $40,000 a year is actually costing you closer to $56,000 a year.

Unpredictable Expenses

If your expenses vary greatly from month-to-month, it can be difficult to really ascertain how much it costs to run your business, and what your profits actually are.

And then there is the surprise expense that entrepreneurs aren’t always ready for it. This could be anything from damaged equipment, to suddenly having to terminate and replace an employee. You didn’t plan for it, and you’re not sure you’re ready for it.

To cut down on the impact of these surprises, you need to invest in bookkeeping services or small business consulting to find out how to prepare for these expenses.

We Can Help You find the Leak and Plug It

We offer a combined total of over 40 years experience in bookkeeping services, tax planning and entrepreneur support. We provide accounting services for small to medium-sized businesses.

How can we help you? Click here to contact us anytime.