I got a lot of good feedback from the first part of this newsletter, so I wanted to follow up with a second part. I didn’t actually know there was going to be a second part, but after the questions I got I thought it made sense to add.
Most of the questions revolved around “this is great, but tell me more” about how to double the profits in your business.
So, here are some of the follow-on topics that go along with wanting to do this and do it well and effectively! I call them the five Ps because that sounds catchy, and with a little work, I could rename some of them so I, in fact, had all five start with P!
Check out what else we’ve been up to!
- Matt Reviews: Most Profitable Side Hustle? (Short Video)
- Matt Reviews: Advice from Tony Robbins (Short Video)
- Matt Reviews: Is this Ecommerce Side Hustle Really Going to Make You Money? (Short Video)
- Business for Sale, Would I Buy It? | Limo Services (Short Video)
- Referrals – The art of reciprocity in Business with Matt Remuzzi (Podcast)
Priorities:
This comes first- you have to want to do this. Now you’d think (I would, anyway) that every business owner would want to increase their profits, and to double them would be amazing. But that’s not nearly as common as you would think. Some people get focused on revenue even though you can go broke while selling millions a year if you don’t have your profits (and cash flow) figured out. Other people just don’t realize where they are leaking profits, and then some people feel like they’re good enough.
The only way this works is if you want to do it and feel it is important. I personally would take high profits over any other business metric. With higher profits, you can invest in growth, weather downturns, pay people better, out market the competition, do R&D to find new products and try new services, and of course, pay yourself and set aside cash for the future. The lower your profits, the more you have to cut those things out, to the point where you cut so much you’re in a death spiral of declining revenue, meaning even less profits means even more cuts, which means even more lost revenue and so on.
Even if you feel like you’re doing OK, more profit for the same amount of effort is very beneficial to your business now and in the future (exit value!). Virtually every business I look at has some opportunity to increase profits, and most have quite a bit. But only if you decide you want to make this happen- nothing happens on its own. So step one in doubling your profit is realizing it’s something that is important to your business and that you want to do!
Positioning:
Positioning, something I’ve written about before, is just how the market sees your business. The best way to increase your profitability is to have something to offer that people want more than the alternatives. This, in turn, means you have an easier time marketing and generating interest, and it also means you can charge more of a premium.
If your business is indistinguishable from the competition and has nothing special to offer, it’s going to be harder to market (it will cost you more) and harder to charge a premium. Both of these factors lead to lower profits.
The second thing to do is figure out what you can do better and make sure that becomes part of your marketing strategy and who you serve. Many people think of this as niching down, and sometimes that’s what it means, but not always. The important point is to be different in a good way that offers more value to your customers. If you do this, you now have a position in the market you can own and profit much more from as a result.
Pricing:
This one was one of the centerpieces of the first article, but it remains a key part of the process. But you can’t just arbitrarily raise prices in most cases. You need to have a reason you can charge a premium and earn it, so your customers aren’t just paying more but instead are making a decision to pay more to get more than they will elsewhere.
This is where the positioning comes in, and making sure you have something to offer beyond whatever they can just go get anywhere else. If you don’t have that, then you are just the more expensive option, and you can expect to see sales and profits decline as people figure that out.
Processes:
Part of the way you can increase profits is by running an efficient and lean operation. The only way to do this effectively is to have your business run like a well-oiled machine, and that happens when you have SOPs and processes in place. You want to be able to make the most of technology and replicate what works best, and that comes from understanding each step in what you do and making sure it’s done in the most efficient and profitable way. Businesses that operate each day as if it’s their first day in business never go very far and tend to rely on the owner to do everything and make every decision.
If this is you, start now on figuring out how to start building repeatable processes and incorporating what works best into each thing you do. If you already do this somewhat, keep at it and keep improving. Look at places you can cut costs without impacting value and places you can add a lot of perceived value for little additional cost. This combination widens the margin between your price and your cost and builds profits.
Prospecting:
With your positioning down and your pricing updated, the next step is to make sure you are going after the best customers- those who see the value in what you do and are happy to pay the prices you charge to get what you offer. Stop wasting time on customers who aren’t a fit or who drain your profits by taking way more than their allocated time or resources. Focus your prospecting so your marketing is efficient and your time and ad dollars are getting to the best overall fit for your business.
Taking all these things together, it is very doable to double your profits, even in a relatively short amount of time. And as I mentioned, high profits should really be the goal of any business owner, no matter what business you’re in or where you currently stand on the journey!