25 Do’s and Don’ts to Make Your Small Business More Profitable

Small businesses can struggle with profitability for a number of different reasons. They keep prices too low. They focus more on big picture ideas than real consumers. They have way, way too many expenses. The list goes on and on.

But even if your business doesn’t make a lot of money early on, the goal should eventually be to sustain operations and earn a profit. In order to accomplish this, you need to follow a specific set of do’s and don’ts.

To learn more about some effective methods for improving profitability, Small Business Trends recently spoke with Sam Pillar, CEO of scheduling software provider Jobber. Here are some top tips to help you earn more and cut out excess expenses.

How to Make More Profit in Your Small Business

Do Calculate the Exact Costs for Your Business

Before you focus on increasing profits, you have to know where you’re starting from. That means you need to know all of your costs. And don’t just calculate general expenses either. You also need to know how much your regular activities are worth to your business.

Pillar explained in an email interview with Small Business Trends, “Profitability isn’t rocket science — it’s about the relationship between revenue and expense. Getting a very accurate view of what’s referred to as “unit economics” — what the entire revenue and cost chain looks like at a micro level (e.g.: how much a minute of drive time costs, the revenue yield on a specific piece of machinery, etc.) — is essential to supporting the business. Getting clear, accurate and real-time visibility to your unit economics is key. When owners can find the bandwidth to focus and spend their time on the things that matter, they tend to be able to make good decisions.”

Don’t Spend Too Much Time on Low Value Activities

Once you know what your time is worth, you can focus more of your time on the things that actually drive results to your business. That means cutting out the things that don’t add much in the way of value.

Pillar adds, “Running a small business is an all-encompassing world — once the company starts to grow, the biggest mistake people make is spending too much time on essential, but low-value activities. A great example is things like payroll, accounting, invoicing, scheduling — all activities that are essential, but can often consume way too much time for a business owner, the employees, and their office staff.”

Do Automate Where Possible

Since some of the low value or mundane activities you want to cut out are essential functions, you need to find ways to accomplish them without spending tons of time on them. That’s where automation software and online solutions come into play.

Pillar says, “Automating those out frees up much needed time to work on the business, instead of in the business. A key development over the past number of years for small businesses has been the emergence of mobile solutions to these essential, but low value activities, enabling businesses to manage their team, their clients and their billings from nearly anywhere, and often in a single platform solution.”

Don’t Rely on Paper

It’s also a good idea to eliminate waste where possible, both in terms of expenses and time. Using paper in your systems and processes can be extremely inefficient, as it can get lost and be more costly than using online tools or automation.

Do Track Your Time

You also need to know exactly how you spend your time if you want to eliminate other types of waste in your business. Use a time tracking software or keep track manually so you can get a good picture of what’s happening.

Don’t Forget About Your Team

However, there can also be tons of waste when it comes to how your employees spend their time. So you need to also find ways to keep track of this and hold people accountable.

Pillar says, “For many small businesses, the single biggest expense is people. Salaries and related compensation is only one factor employers need to consider; the time and effort those employees consume can spell lost revenue and profitability for business owners if it’s not spent efficiently. In service-driven companies, especially those that do work outside of their own offices, factors like drive time and fuel costs are fairly well understood today. As a technology company, we know that things like lost productivity due to inefficient communication between employees, leadership and/or clients, the costs that come with running the business without the benefits of technology, and spending too much valuable time on essential, but low-value tasks all contribute to eroding your profitability.”

Do Analyze Your Finances Regularly

Once you have systems in place for tracking things like time, expenses and earnings, you need to keep an eye on those things regularly. Analyzing any changes can help you determine what’s working for your business and what isn’t.

Don’t Undercharge Customers

One of the major mistakes businesses make that leads to low profits is undercharging. If your prices are so low that you can barely cover expenses, you might want to re-think your offerings to make everything more sustainable.

Do Make Buying as Easy as Possible

Another potential roadblock is a difficult buying process. If customers have to jump through 10 different hoops in order to complete a purchase, they’re more likely to go with a competitor instead.

Don’t Focus Too Much on Bringing in New Customers

While it’s always good to be open to bringing on new customers, you shouldn’t focus on them so much that you neglect your current ones. You can potentially make more profits by focusing on increasing sales to existing customers.

Do Prevent Theft and Waste

You might not be able to prevent all waste and theft in your business, but that doesn’t mean you shouldn’t try. Put systems in place to detect and alert you of any issues or abnormalities so you can address them as quickly as possible.

Don’t Rely on Constant Discounting

Even if your regular prices are sustainable for your business, you might sometimes offer discounts to attract new customers or move inventory. While this can be a decent strategy at times, it can definitely be overused and devalue your products or services.

Do Look for Ways to Increase Minimum Order Prices

Instead of providing basic discounts, you can try to increase sales by offering bulk discounts, bundling or similar offers aimed at increasing the size of orders so the company makes more money overall.

Don’t Keep Excess Inventory on Hand

It can also be somewhat wasteful to keep tons of inventory on hand, since you need to store and manage it. So it can be beneficial to provide some discounts or incentives to move any excess if you’re getting new products delivered.

Do Give More Opportunities to Top Sellers

When it comes to actually selling products, it makes sense to put more stock in what’s been proven to work. So when you have new prospects or big new opportunities, make sure your top sellers are on it so you have the best chance of closing.

Don’t Overlook Supplier Price Hikes

Paying suppliers and vendors is often part of running a business. While you can’t control the prices those suppliers charge, it is important to always track those charges and note any changes so you can constantly get the best prices.

Do Negotiate Constantly

It’s also a good idea to negotiate with vendors so you can get better prices rather than just paying the full cost, which can sometimes be excessive.

Don’t Pay for Costly Services and Activities

In some case, you might even want to cut out certain vendors or service providers altogether if what they provide isn’t worth the cost.

Do Confirm Service Calls

For service businesses, a major source of waste can be showing up for service calls if the customer isn’t actually there. So for this reason, it’s a good idea to quickly confirm before wasting time driving and doing the administration work involved for each call. Pillar even suggests automating this part of the process.

Don’t Undervalue Your Time

Just as product businesses sometimes undervalue their physical goods, service businesses can sometimes minimize profits by not valuing their time as they should. So you need to set prices taking all parts of the process into account, including any administration work involved in providing a specific type of service.

Do Focus on Providing Great Service

No matter what type of product or service you offer, providing a great experience to customers should always be a top priority. Doing so can help you build repeat business and even gain referrals, which essentially serve as free marketing.

Pillar says, “Do everything in your power to absolutely delight your customer. Going above and beyond to deliver an amazing customer experience increases the chance of repeat bookings, and might inspire your customer to recommend your business. These are both positive levers on the unit economic model of a business.”

Don’t Continue Marketing Activities That Show Minimal Results

Marketing can be another major expense for a business. It can certainly be worth it in some cases. But if you’ve tried a certain tactic and seen minimal results, it’s probably best to cut ties.

Do Track the Performance of Everything

For everything from marketing to suppliers, it’s a good idea to constantly track performance and re-evaluate what costs are really worth it for your business. Then cut the rest out.

Don’t Go After Every New Opportunity That Sounds Exciting

New opportunities can really help to grow a business. But that doesn’t mean you should always chase after the next big thing. Carefully research and consider the risks involved with new opportunities before pursuing them so you don’t end up wasting tons of time and resources.

Do Focus on the Big Picture

Once you make your business more efficient in terms of the day-to-day operations, you can then focus more on the important, big-picture things that go into running a successful business.

“Many customers believe that the most difficult parts of the business involve working on the tough stuff — finding good people, retaining them, acquiring more customers and managing their brand. These are the important, rather than the urgent, things for a business owner to be working on — automating out the menial stuff can be very liberating, and impactful to the business overall.”

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