How Can you Earn More from your Small Business?
This is a question I’m frequently asked.
During my Business Boost Workshops: 16 half-day workshops in July and August with individual owners / directors of small businesses – I noticed how similar topics and questions were being asked in several workshops. One topic in particular was – How can I earn more from my business?
Clients told me: I don’t earn enough / I work really hard but I’m not earning enough from the business / How can I earn more?
So let’s talk about this topic and let me explain how as an owner / director of a small business, you can set about earning more in future. I’m going to show you there is a system and approach you can take to determine how much you will earn from your business over a 12 month period. In short, you plan to earn more.
Focus On Profit
You know that in order to earn more, the business has to generate more profit in the future and that probably means doing some things a little differently in future than at present. This certainly means adopting a profit-oriented mind-set. This is an important point, because many of the business owners I have met haven’t been focussing on profit as much as they should (I’m sure they do now).
Adopting a profit-oriented mind-set is an important step towards earning more from your small business in future: it means seeing the profit in every part of your business and looking very carefully at everything you buy and sell. Here are three areas to focus on:
- Understand the gross profit in everything you sell. Make sure it’s enough to make the sale a good one and worthwhile. Spending your hard-earned cash to market products or services that can generate the highest gross profit might be a good option. That said, it’s never good to have some products and services that generate huge margins, while others in the range hardly cover their costs. Aim to normalise the gross profit percentage across as many of your products or services as you can.
- Before committing to any purchase that will contribute to Indirect Costs (Not Direct Costs associated with making an individual sale), consider it’s impact on your Net Profit (Your bottom line). Remember that Direct Costs are only a concern when you are making a sale and they tend to take care of themselves, but some indirect costs stay with the business for a long time and need to be paid in both good and tough times.
- Generally move your ‘personal attitude’ pendulum towards the ‘Scrooge’ end of the range. Question the value of every single purchase: similarly, make sure that you exploit every opportunity to the full and don’t leave money on the table. Work even smarter to increase the price of each product or service you sell.
How Much To Earn?
So, what should an owner / director of a micro or small business expect to earn? I have been often asked this, but quite obviously there can be no correct answer.
Given the business owner / director is a shareholder, not an employee in the way most others are and is free to sell the company’s products and services to generate as much profit as their skills will permit, then the answer is probably – they should expect to earn as much as possible.
I have worked with business owners at both ends of the scale, earning a few tens of thousands to several hundreds of thousand of pounds per year.
Payscale, who keep their finger on the pulse of pay and earnings of the employed in the United Kingdom suggest the typical salary of an salaried Operations Manager with good experience of managing a small business, will earn around £34,500 per annum. Even if the comparison is not too accurate – and frankly given all the variables here, it won’t be, this could be a reasonable comparison for someone in their first year or so of running their post-start-up micro business.
An issue I see with many small businesses are not being run as a Balanced Business – where there are enough opportunities being generated, sufficient orders being closed at the right margin: where cash flow is healthy and staff are working well. The business is not ‘Balanced’ and because it is not generating as much profit as it could, the owners / directors can’t earn as much as they’d like.
When businesses change from being un-balanced to balanced, we notice they begin generating far more profit than before – and the owners / directors generally notice they have the opportunity to earn far more from the business than before.
If you are interested in learning more about increasing the amount you earn from your small business in future, then I have prepared a free guide.
In your free guide – Earn More From Your Small Business you will learn how to plan to increase the amount you earn from your business, in just 12 months.
Here’s what you will learn in my free guide:
- A proven approach that you can follow, to determine how much you can earn from the business in the year ahead. Aim to earn up to 50% more in the year ahead.
- A different way to see the relationship between your business, it’s profits and how much you earn from it.
- How to produce your own Personal Earnings Target. In the guide, you’ll see an easy to follow plan that shows you a way to calculate how much more you can earn from your small business in the year ahead.
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