Small Business Pam Watson Korbel
|Pam Watson Korbel is an expert on small business and revenue growth. She personally managed exponential growth in two companies: a software firm that grew by 500% in four years and a health care firm that grew by 1800% in eight years. In addition, she has been advising fast growth companies as a coach and consultant since 1996.|
Ideas to Improve Profit
Small businesses should obsess over improving profit because that single factor drives the owner’s wealth and the valuation of the business. By breaking down the formula for profit revenue minus expenses equals profit entrepreneurial managers can identify several ways to improve profit.
Increasing the top line in your business leads to revenue growth. Some ideas to add revenue without increasing expenses as fast include:
Every business regardless of size needs a process to continually analyze expenses, which creep upon their own without much effort from entrepreneurial managers. To monitor expenses more carefully, consider:
Focus on EBITA
EBITA stands for earnings before interest, taxes and amortization. EBITA plus an owner’s compensation are generally added together to create the financial factor that drives your valuation. The higher the two numbers, the more the business is worth. To improve EBITA, consider:
Profit is also important to small business because it drives the cash available to run the business. (Most owners agree that ‘cash is king’ in their business.) All ideas that improve profit will lead to an improved cash position resulting in opportunities for further investment in the business. For example, a $1 million business that generates 7 per cent annual profit creates $70,000 annually to reinvest in equipment, new staff, marketing or floor space, for example, to grow.
Lastly, the bottom line for every business owner is to become comfortable reading and interpreting financial statements and acting on actual results. Accountants, financial advisors, small business consultants and training programs can all be valuable aids to improve your comfort with your accounting and finances.
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