Profitability is what will determine whether your business succeeds or fails.  There are many ways to manage and track your profitability.  Here are 6 great tips we have gathered that help us maximize our profitability.

  • Don’t resell products.  Don’t get involved with reselling products unless you have a decent profit margin; generally in the neighborhood of 25 to 35 percent.  Any less, and the time and money spent managing the retail system will cut into your profitability significantly.
  • Bill clients for all of your time.  You are running a business, not charity.  If you do choose to write off a few hours, record them on the invoice but credit the client back.  Use a line item reversal and indicate why you’re crediting it back as courtesy hours. Don’t do this too often though, or your profitability will suffer.
  • Never turn down an agent or referral fee unless it’s a real conflict of interest.  All these passive income trickles can really add up at the end of the year and contribute to your overall profitability.  
  • Be relentless about slashing expenses.  Just about everything you spend your time or money on should make you more productive and more profitable.  If your expenses aren’t making you more productive or improving your revenue and profitability, consider whether you really need them or not.  
  • If you’re going to be using credit cards for your business, and you probably will be, get ones with low interest rates.  If you’re going to be carrying any business-related debt, try to get cards that have some kind of bonus attached to them.  
  • Switch between a money market account and your non-interest-bearing checking accounts.  As your business grows and you start carrying more substantial account balances during the year, float your funds back and forth between interest-bearing investments.  A couple thousand dollars a year in interest income can go a long way toward paying for some of your overhead items and improving profitability.  

Bottom Line on Profitability
A profitable business is a sustainable business.  Look at all of your business processes in terms of profitability and determine what you need to do more of and what you need to cut out completely.  Always be on the lookout for ways and means to improve your bottom line.

In this article, you’ve been introduced to Profitability. To learn more about how you can improve your knowledge about Profitability, just click here now to get access to a free one-hour audio training program on 5 Easy Ways to Grow Your Computer Consulting Business.