Wow, we covered a lot of information in the last month. And for all that we did cover, there’s so much more information that we could have given you… but it would have been difficult to understand it all at once.
Profitability, in theory, is simple, but in practice, it takes time to understand and even more time (and plenty of energy) to apply your knowledge to your small business.
Let it never be said that we left you high and dry! We’ve got some wonderful resources that we use ourselves and also use with our relatively diverse set of small business clients.
As we know by now, profitability isn’t just in the numbers, profitability is much more of a measure of your efficiency and ability to grow. More specifically, profitability is a measurement of how much profit you can make with a given set of resources and inputs.
We know that having a firm grasp on your expenses is the first step to understanding how your business is creating profit. You can also save yourself a lot of time and money by reviewing your expenses on a regular basis and trimming away anything unneeded or by replacing current solutions with more efficient ones.
Once you have a handle on where you're spending your money, you then need to become intimately familiar with where and from whom your income is coming from. Your most profitable customers should always be a high priority for your business, and getting more of them or creating services that give you the same amount of profit are key to developing your small business!
Since we’ve spent so much time talking about measuring things, it’s time to talk about the tools we use to get these much-needed metrics. Plus, I assured you last time that you had nothing to fear!
KPIs, or Key Performance Indicators are a metric that is chosen to measure progress towards an intended result or outcome.
The KPI(s) that you choose as metrics will depend on the type of goal that you are focusing on. There are some key factors that make a good KPI though, and here they are:
KPIs are an extremely valuable resource to business owners of any size. Taking advantage of them as a small business will not only provide you with the confidence to make truly informed decisions, it will add confidence to every part of your business; your employees and your customers will benefit from your confidence not only in yourself, but in improvements that it brings to your small business.
Simple Numbers, Straight Talk, Bigger Profits by Greg Crabtree & Beverly Blair Harzog
A relatively down-to-earth approach to understanding how you go from having numbers to making changes based on that knowledge.
Seven Habits of Highly Effective People by Stephen Covey
Every one of these examples can be applied to your work habits and processes. Likewise, every member of your company will be able to learn new skills that you can put to better use in your business!
KPI.org - A website designed to help you understand what Key Performance Indicators are and how you can start utilizing KPIs in your business to drive change and gain information.
Facebook Master Group - we regularly post workshops and discussions with the intent of helping you make the most of your resources.
Here's an example of a bookkeeping workshop that we help at the beginning of the summer: https://www.facebook.com/events/2159181464181044/
We hope to see you again Soon!
We want to hear from you! Come visit us over at our FaceBook Page and let us know which piece of advice from our profitability series was the most eye-opening for you and why. We’re always interested to know what your triumphs and struggles are so that we can be best prepared to give you the most relevant information for your small business!
Disclaimer This article presents general information and is not intended to be tax or legal advice. Refer to IRS publications and discuss possible tax deductions with your tax preparer.
Join our mailing list to receive the latest news and updates from our team.
Don't worry, your information will not be shared.
Stay up to date on all the latest tips, tricks, and tools from Bookkeeping Academy Online.