Small Business Success: 7 Strategies to Turn a Profit Immediately

If you’ve started a business, but haven’t seen the profit you’d hoped for, read on. Over the past 13 years, we’ve discovered many strategies for turning a?profit , and we consistently find that understanding our Profit and Loss (P&L) statement is crucial. By applying key tactics based on insights from your P&L statement, you can avoid the uncertainty that comes with operating in the dark. If this situation sounds familiar to you, consider exploring some – or all – of the essential strategies we regularly use and learn how to take your first steps toward effective implementation.

REVENUE TRACKING

The P&L statement provides a detailed view of your revenue streams. It will help you understand which services are most profitable and which might need adjustment. Focus on high-margin services and eliminate underperforming ones.

ACTION:?Implement a categorization system for revenue sources. Break down revenue streams by service type, client, or project. Review and analyze these categories monthly to identify trends and adjust your focus accordingly.

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PROFIT MARGINS

The P&L statement shows your gross profit (revenue minus direct costs) and net profit (after all expenses are paid). Understanding these margins helps you assess how effectively your business is converting revenue into profit. It can also highlight areas where you need to improve. This can be a daunting task, but it will pay dividends if you pay close attention and are strict on your boundaries when it comes to your services, pricing, and offerings.?

For example, if a virtual assistant business like ours set hourly rates without factoring in overhead costs like onboarding, software, or marketing expenses, we would find our actual costs exceed our income, leading to losses despite generating revenue. For instance, charging $30 per hour without accounting for $10 per hour in operational costs could result in a negative profit margin.

ACTION:?From your statement, calculate your gross and net profit margins monthly?(Gross profit / Revenue) x 100; and net profit margin: (Net profit / Revenue) x 100. Then,?compare these margins to industry standards and historical data or performance. Lastly, use this data to identify areas where you can improve margins, such as adjusting pricing or reducing costs.

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EXPENSE MANAGEMENT

Your P&L should list all your expenses, including things like materials, subcontractors, rent, and utilities. Identify areas where costs can be reduced and/or managed more efficiently, which directly impacts your profitability. Personnel is often one of the biggest costs. Are you operating with heavy personnel costs that could be reduced with a combination of a smaller full-time team plus additional?fractional support ??

ACTION:?Develop an expense tracking system. You can easily do this in Excel or similar programs. Look for unusual or unexpected expenses and areas where costs can be reduced or optimized.

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BUDGETING AND FORECASTING

If there’s one thing you take away from this article, it should be this: go through your budget every single quarter with a fine tooth comb. Compare actuals with your budgeted figures and make adjustments to stay on track or revise your financial strategies to meet profit goals.

ACTION:?Have your bookkeeper create a detailed annual budget based on historical P&L data. Update the budget quarterly with actual performance figures and adjust forecasts as necessary. Use this updated budget to plan for future expenses and revenue goals.

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PRICING STRATEGY: KNOW YOUR COSTS!

The only way you can price your services appropriately is to know your costs. Once you know them, you can ensure they cover expenses and generate the desired profit margin. Without this, you will fail.?

ACTION:?Analyze your cost structure and profit margins to determine pricing strategies.?

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DECISION MAKING

The P&L statement provides crucial insights for making strategic decisions, such as expanding services, investing more in your marketing initiatives, or hiring additional staff. Understanding your financial position helps you make informed choices that support business growth.

ACTION:?Create a decision-making framework to evaluate potential impacts on profitability and conduct scenario analysis to predict outcomes.

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CASH FLOW MANAGEMENT

Understand your income and expenses because it is essential for effective cash flow management.? Proper cash flow management supports operational efficiency, brand confidence, and long-term profitability, allowing a business to navigate challenges and capitalize on opportunities.?

ACTION:?Develop a cash flow projection analysis. Then, monitor cash flow regularly and compare it against your projections. Adjust your financial strategies, such as delaying non-essential expenses or improving receivables, to ensure positive cash flow.

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Each of these action items helps to use your P&L statement effectively, contributing to better financial management strategies and increased profitability for your business.?

Historical data is invaluable for future data analysis, as it provides a benchmark for assessing performance, making informed decisions, and?goal setting , rather than relying on guesswork which can lead to mismanagement.

Ready to find the?fractional support ?that meets your budget??Contact us today. ?We’ll show you how you can regain focus on what you truly love to do in your business.?

Lauren Gall?is a native Midwesterner who studied Strategic Communications at Ohio State University.

These days she resides in Atlanta and uses her years of experience in leadership, sales, and business development as the Co-Founder of VaVa Virtual Assistants.

Lauren loves to take on challenges and help business owners find the right solution for the obstacles they come across. In her free time, you can find her hiking with her chocolate lab, Bubba, doing yoga, traveling, or walking the beltline.