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How to Stop Your Overheads Killing Your Profits

Written by: Lorraine Pirihi

Article Overview: Many business owners falsely believe that the more work they have, the more money they make. Because they are ‘busy’ and get more help to manage the workload they think they must be making more money which is not necessarily true.

How to Stop Your Overheads Killing Your Profits

Many business owners falsely believe that the more work they have, the more money they make. Because they are ‘busy' and get more help to manage the workload they think they must be making more money which is not necessarily true. Jenny ran her advertising business from home. As her business grew she had 2 people help her on a part-time basis. She eventually convinced herself it would be a good idea to move into a ‘real' office. To her this symbolized that she was a 'success.'

It took her a year to realize that the overheads were killing her profits. Jenny was bringing in more business and kept hiring more staff to keep up with the workload. Because she was ‘busy' she was under false illusions that equated to more profits!

However, she didn't review her figures regularly. I had continually told her she must keep track of this side of her business and unfortunately she ignored me.

Being a creative person, it was far more exciting visiting clients, networking and having fun. Jenny buried her head in the sand when it came to the figures. When Jenny finally woke up to the fact her cash-flow was drying up and why, she downsized and went back home. She now only has a bookkeeper and a virtual assistant on a part-time basis and now makes far more money without all the other hassles.

Do you have any idea if your business is really profitable? Tracking and measuring your income and expenses needs to happen on a weekly, monthly, quarterly and yearly basis.

Set time aside in your diary each week to review your finances. For me it's every Friday afternoon, without fail.

Create a simple template to track your income and expenditure, or get your bookkeeper to design it, so it is meaningful for you.

Basic questions to ask yourself when reviewing your figures are:

1. What are my income and expenses?

2. Products and services - are they profitable enough?

3. Can I make more money with less effort?

4. How much does it cost me to deliver or produce my products and services?

5. What profit am I making?

6. Do I need to increase my prices?

7. Where are the most profits coming from? Which products and services? What

is the most profitable and easiest to provide?

8. Expenses - can I trim any of my expenses? I.e. phone bills, car expenses,

insurances, support team etc.

9. Is the money I'm investing in advertising, marketing, networking, memberships,

coaching etc. providing me a good return of my time and money?

The Final Word

If you want your business to prosper, discipline yourself to review this side of your business every week.

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Article Tags: basic questions, bookkeeper, business from home, business owners, cash flow, creative person, friday afternoon, hassles, head in the sand, illusions, income and expenditure, jenny, overheads, part time, profits, set time, time basis, virtual assistant, wh, workload



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