It is the new year, and for existing businesses, that usually means re-evaluating how you budget investing your time and money during the year to hopefully create a profit. 99% of the time, changes can be made to help you improve your base profit margin. If your business is still new or you didn’t create profit last year, this article may be imperative in helping you determine what changes you can make to be in the black for 2017.
Many marketing companies are likely to encourage you to dump as much money as feasibly possible into pay-per-click (or PPC) advertising such as Google and Facebook.
Unfortunately, when it comes to marketing, you are simply hoping to “break even or better.” With that, you are hoping that by investing money into bringing in a new customer, client, or patient, that they will also bring new prospective consumers with them via friends or family – eventually.
So, when you invest in advertising this way, you aren’t expecting to impact your profit this year, but in the years to come – which is why they will use the term invest.
If you want to positively impact your bottom line for 2017, then you will want to make the most of your budget and resources. Thankfully, there are a few ways to do this without cutting corners on quality.
Allocating resources is an incredibly important facet to improving your profit margin year-over-year. A resource is broad term to describe something that helps your business grow and succeed. Here is a list of some of the most important resources to invest in this year:
- People – People are your number one resource. So, make sure that your team members are doing the job that best suits them. Keep in mind that happy people are productive people! If you have a team member that needs improvement – remember that it is more expensive to hire and train a new person than it is to improve the one that you already have! Additionally, people can be other local businesses that help you thrive. Make sure to improve and expand the development of your business-to-business (b2b) relationships this year!
- Finances – Finances are critical to operating your business. Simply put, finances are the cash, loans, and credit you receive through any given year. Finances help you keep your lights on, employees paid, and product or services moving.
- Tangible – Tangible resources are the physical components that help you run your business. Whether you have an office, a storefront, a printer, a cash register, and so on – you likely have tangible resources that help you get your job done day-to-day. It is important that you evaluate each tangible resource to determine its necessity. You may find that your current register has a much higher operating cost than necessary, and can be replaced entirely with a mobile phone!
- Digital – Digital resources are very similar to tangible resources, except they are not resources you can pick up or touch. For example, accounting services such as QuickBooks would be considered a digital resource. It is imperative that you evaluate your digital resources and cut any unnecessary services. If you find that you haven’t gotten any business from your listing on the Better Business Bureau website, it likely isn’t worth the continued monthly “investment.” Be sure to ask yourself, “Did this service at least pay for itself last year?” If the answer is no – it has to go!
- Knowledge –Knowledge is often a double-edged sword, as you typically recognize your own personal knowledge as common sense and anything unknown by you is extensive (or even unnecessary). When it comes to being a business owner, it is important that you constantly evaluate knowledge and take a step back! It is impossible for anyone you know to have the exact personal knowledge as yourself – and it is important to impart that on your employees. Never assume that every experience is the same. Additionally, it doesn’t hurt to learn from your employees’ experiences and reach out to other successful business owners in your industry!
Allocating Your Budget
With the new year rolling in, it is the perfect time to readjust your budget. Ultimately, this is how you decide you will spend your money on a weekly, monthly, quarterly, and yearly basis. If you plan to expand your services or open a new storefront in the spring – that goes in the budget! If you plan to attend a business owners summit in the fall – that goes in the budget! Planning the big expenditures for the year up front will help you determine your cash flow for the year so that you know how much money will be available for unexpected costs.
Here are the categories you can expect to plan in your budget this year:
- People – This category is reserved for W-9 employees. Ensure that you budget raises, bonuses, and possible promotions as well. Raises and bonuses can be budgeted as a bucket to draw from when you want to reward your hardest working employees. Just be sure to not empty the bucket too quickly!
- Travel Costs – This category is comprised of the travel expenses for both you and your employees this year. Make sure that if you have big events planned that the travel costs are also budgeted for within this category!
- Vehicles – If you or your employees utilize company vehicles, it is important to budget the cost to run the vehicle and the maintenance costs for the year as well.
- Equipment – Equipment is a broad term used to describe many tangible resources. For some businesses, equipment may be a factory machine that assembles products, while for other businesses, equipment could refer to something as simple as an electric pencil sharpener. Be sure to budget for new equipment purchases as well as equipment repairs.
- Consumables and Supplies – This will likely be the category you find you need to create a weekly budget for. Consumables and supplies may include copy paper, pens, dry erase markers, toilet paper—the list will seem endless at this point in the year. Be sure to review how much you spent on each item last year and see if you can adjust the budget to help improve consumption. For example, limiting the number of pens that employees can take from the supply closet will marginally help your profit for the year, but if you follow the same procedure for each consumable and supply, you will find that your profit base can improve drastically.
- Subcontracts – Subcontracts is the services you get from other people or businesses. Good examples of these include printing services, marketing services, or a BBB subscription. Again, you will want to evaluate the value of each subcontracted employee or service you utilize. Ensure that their cost is creating profit for you.