What Being Profitable Really Means
Do you know how profitable your business is? To be clear, your profitability isn’t the revenue you’re bringing in or even your net income, after expenses.
One of the biggest mistakes we see business owners make is over-simplifying the profit in their business. It doesn’t have to be a complicated process, but it does take a little bit of thought.
And to actually see real profit month over month and year over year? That takes a plan.
For us, Profit First is the plan.
It allows us to take a profit every month, regardless of our revenue, because we take our profit first. The revenue matters, the net income matters, but the fact that we’re profitable means more.
We’re not going to talk about how to be more profitable here; that’s a blog post for another time.
But we are going to address why your bottom line revenue isn’t what matters when trying to grow a profitable business.
It’s easy to get excited about having a big revenue month. As bookkeepers, we know better, but we get excited too! To see a five-figure month is exciting. To hit $20k, $50k or more for the first time in a month is cause for celebration.
But once the confetti settles and the champagne goes flat, what does your bank account look like? Have you paid out all that revenue to expenses? Did you pay yourself a livable wage this month? Do you have anything left over?
Usually the answer is yes, all the money is gone. No, you didn’t pay yourself this month (again) and no, there’s really nothing left over.
So while the revenue looked and felt pretty good while it lasted, there was nothing left for profits and nothing left for you, the business owner. And our guess is that you spent much of that big month feeling pretty stressed out as you made sure the work was getting done.
Being profitable means a few things:
- You’re able to reserve a percentage of your revenue as profit each month, usually because you set it aside first.
- You’re able to plan out and/or control your expenses so you’re not spending every dollar every month.
- You have enough cash to pay yourself and your employees a living wage. Consistently.
- You enjoy a quality of life where you’re able to spend time with loved ones and enjoy some of your own hobbies. In other words, you’re not working all day, every day.
- You don’t stress out so much about revenue because you have a really good handle on your expenses–and you know where your break even point is because you hit it regularly.
Profit is so much more than your revenue and having a profitable business will help you feel more relaxed and comfortable about where your business is and where it’s going. If this feels out of reach for you, we can assure you that it’s not. It just takes a plan and some accountability.
Let us help you find the way. Book a call with us today so we can show you how.