Running your own business can be an extremely fulfilling occupation, but it will not last long if the business does not turn a profit. How do you make sure you are not spinning your wheels or falling into an expensive hole while pursuing your dream of business ownership?
You learn from the following tips and continue to learn so you can earn. Here are four tips for running a profitable business that will continue to grow.
1. Be Conservative in Your Estimates of Expenses and Revenue
One of the hardest things for a business owner to do, especially when just starting our, is to put realistic numbers in the expense and revenue columns of the company ledger. Just like you should expect a project to take more time than you thought, expect your business to cost more to start and run.
Do your homework so you can make realistic estimates of the costs of starting up a new business and how much it will take to run it on a daily, monthly, and yearly basis. There are plenty of resources about running a business. Take advantage of business calculators, advice from groups and associations, and reputable guidance from online and personal sources.
Carefully determine a reasonable and profitable price point for selling your product or service. You must be able to pay for expenses and have money left over to plow back into the business or to pay yourself a living wage.
You are not selling a product; you are providing a solution to a problem. It makes no sense to sell a solution to a non-existent problem. Just because you make it does not mean they will come, to paraphrase a popular movie.
Be sure what you are selling is something people want to buy. Furthermore, make sure enough people want to buy it and will continue to buy it to keep you in business.
That being said, if you have thought of selling it, so has someone else. This makes your offering a commodity.
Take a look at what your competition is doing to attract leads and close sales. Do they have a better way of marketing? How is their website set up? Are their prices similar to yours or have you over or undervalued your product or service?
Learn from what others are doing, both the things that work and the ideas that fail. In order to succeed, you must find ways to differentiate yourself in a crowded field.
3. Marketing, Marketing, Marketing
To be specific, we are talking about marketing, not branding. Too often new business owners spend time and money building a brand when they need to be building awareness by generating and converting leads.
In other words, you need to find customers more than you need to create a splashy name for your business. Cash flow first. If you are successful at marketing, your brand will build itself.
Sell for value rather than price. Discounting to get buyers is a good way to go out of business. Instead, build the case for the value of your offering. Show potential customers how much they will gain from buying your product or service or how much they have to lose if they continue to go on without it.
Find inexpensive or free ways to add value to what you are selling and you will have no need to discount.
Create marketing that supports and illustrates that value. Then test and measure your marketing efforts. You need to know what is working so you can keep doing it. You need to know what is not working so you can fix it.
Everything goes back to differentiating your business to maximize profit and keep a lid on costs and expenses.
4. Manage Your Payroll
With everything else you have to do, payroll can get pushed to the bottom of the list. Do not let this happen.
You need a payroll structure that can consistently and efficiently meet your payroll requirements. Even if you only have one employee, there are steps you must take to satisfy tax obligations, benefits, and wages.
Consistently meeting your payroll obligations helps you retain productive employees who are not worried about whether they will be paid. Unhappy employees who are worried about their paychecks have less attention to pay to the business and will spend more time looking for other work.
Do not be intimidated by payroll management. If you are a small employer, there are excellent resources available to help you. There are software applications to make payroll more efficient and easier to deal with. Alternatively, you could outsource it to a business that provides payroll services.
A payroll management service has the deep expertise you do not have time to develop and the technology in place to consistently meet requirements.
Running a business is hard work. Make the effort count. Do not underestimate how much it will cost to get started and to maintain a business and do not be discouraged if revenues are not as much as you hoped. Find out how you are different and better than your competitors and market your offerings with that extra value highlighted.
Finally, manage your payroll so you will retain your best employees and pay your tax obligations on time so you will not be penalized by the tax agencies at the state and federal level. Outsourcing your payroll management is a good choice when your time and expertise is challenged.
Sam Brotman is a practicing attorney in San Diego and the founder of Brotman Law. His practice primarily centers on all aspects of tax litigation and criminal/civil tax controversies in front of the Internal Revenue Service, Franchise Tax Board, Employment Development Department, Board of Equalization, and various other state/local tax agencies. To learn more about Sam, visit him at http://www.sambrotman.com/ or follow him on Facebook.
This article originally appeared on the SurePayroll blog.