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What is Profit in Business
Broadly speaking, profit is the financial benefit a business realizes after deducting its operational expenses from its gross revenues. Of course, every business aims to remain profitable irrespective of its size, industry/market niche and consumer demographics. However, tech startups have pioneered a business model hinged on spending heavily and incurring huge losses during their formative years.
What are Expenses in Business
The term expenses refers to the economic cost of running a business. This means the costs that a business incurs in the process of generating revenue. Common business expenses include staff wages, office space leases, machinery depreciation, taxes, business license fees, supplies payments, losses to fraudsters, and monthly insurance cover payments.
Key Elements of a Successful Business
It is virtually impossible to run a profitable business without a solid business strategy. In essence, a business plan should cover every aspect of a business including the target market, business goals, competitors, products/services, competitive advantage (due to intellectual property or proprietary technology ownership), hiring, risk profile, financials, capital outlay, and compliance with industry or government regulations. Your business plan should be as detailed as possible because it is the foundation of your entrepreneurial efforts. Moreover, most venture capitalists and angel investors require entrepreneurs to furnish them with their business plans. As such, you would face difficulties raising funds without a reliable business strategy.
One of the leading causes of business failure is unrealistic expectations. Sadly, this narrative is common among fledgling entrepreneurs and business owners who wrongly believe that they have unique products or services. There are several reasons why you should avoid the same pitfall. To start with, unrealistic expectations cloud one's judgment leading to bad business decisions. Secondly, they cause one to underestimate competitors, overestimate consumer-spending power, and fail to anticipate emerging market trends or changes in consumer preferences.
Consumers in developed countries are increasingly shunning businesses that operate unethically. For instance, most consumers expect electronics products and kitchen appliances like fridges to be energy-efficient meaning stocking non-energy-efficient products is a sure way of losing customers to competitors. Consumers also expect businesses to be environmentally conscious, support worthy causes, and avoid exploiting suppliers or workers in developing countries.
Data driven decision making process
To remain competitive and relevant in your market niche, implement and deploy a data-driven decision making process. This is because businesses of all sizes are using data analytics tools to cut operational and production costs, reduce wastage, improve productivity, hire the best talent, and lower the risk of losing money to fraudsters. When implemented properly, this element can improve sales leads, sales conversions, revenues, and profits. Luckily, the cost of data analytics tools is low compared to a decade or so ago thanks to advances in cloud computing and mobile device technologies.
Technology Needed for Business
The simplest and easiest way to bump up business profits is by lowering expenses. With this in mind, you can cut operational costs significantly by integrating technology into diverse business processes. A good example is using technology to automate back office operations like distributing marketing emails, prospecting for leads, and monitoring the actions of visitors to your business's website. Doing so can save your company anywhere from thousands to millions of pounds depending on business size, timeline and nature of web marketing campaigns, and market reach.
To run a profitable business , you must develop and implement a cash-flow strategy. This is very important because businesses need money to pay employees, pay suppliers, purchase raw materials, pay Internet service providers, and buy office consumables like pens and printing paper. In spite of this, many new businesses face cash-flow problems because they tend to provide goods and services on credit in a bid to grow market share. Although this strategy is not necessarily bad, entrepreneurs should ensure they maintain a healthy operating revenue balance.
To start and run a successful business , you must have realistic expectations, create a solid business plan, develop a cash-flow strategy, adopt sound business ethics, leverage technology, and implement a data driven decision-making process. At the same time, you should keep abreast of industry/market developments and tweak your operational strategy accordingly.
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