Basic principle of successfully running a small business centers around profitability in the short and long term. Let’s have a closer look at this concept of profitability. Profit is nothing but the difference between revenue generated and costs incurred. Profitability can be increased by adopting one of the two approaches or both – increase revenue and decrease costs.
Increasing revenues in itself is all about increasing the business volume in terms of reach, product portfolio, new segments, etc. You 10% profits on $200,000 are $20,000 per year. When business increases to $400,000, profits will increase to $40,000 (more or less). This is traditional view of increasing profits. Now let’s add another dimension to more profits.
While you are literally ‘burning the midnight oil’ for increasing business, spend some time on decreasing costs. Let’s assume you have been able to decrease costs by 5% while increasing business to $400,000. Your profits will be $60,000 and not $40,000. Consider cost cutting to be equally important as business development.« Return to all articles