This article is brought to you by the AVEENO® Skin Health Start Up Accelerator. Filled with helpful resources, this entrepreneurial hub is part of AVEENO’s commitment to creating a more diverse and inclusive industry to impact the health and beauty of all skin.
Creating and running your own business is the ultimate adventure, right? And while the joy is in the journey, you have to admit, making money is part of the goal! And while topline sales are a must, you also want to make sure you are growing your brand’s profitably.
The best measure of success is profit. According to a 2019 “Small Business Credit Survey” by 12 Federal Reserve banks, while a slight majority of small businesses reported revenue increases in 2018, a whopping 73% said operating costs had gone up as well, making profits flat overall. It means most small businesses are still on the hunt for ways to boost revenue or cut expenses to make those profit numbers grow.
In profit and loss management, the goal is to work toward generating greater revenues and reducing expenses. This doesn’t always mean selling more product, because if you are not careful, an increase in sales can lead to decreased profit margins or even a loss.
So, how can you and your business increase profits? Here are a few tips to get your started.
Check your financial statement. The first thing to do is create a P&L (Profit & Loss) statement, also known as an Income Statement. You can do this weekly, monthly, quarterly or annually, but if you want to make a bigger impact on your business in a shorter amount of time, don’t wait a full year, start with a weekly and/or monthly statement. This report will highlight your income and expenses to show you where your money is going each accounting period. Now, you can really analyze your business and make smart financial decisions.
Boost efficiency. After looking at the numbers, take a deeper dive into money spent on expenses. If you are still doing things the same way, even 6 months into your business, there may be a better, more streamlined approach available now. For example, maybe there is a new way to ship your products or if you are spending a lot of time in meetings, maybe you can use a cloud-based sharing system to exchange info with employees.
Increase margins. When you want to move the needle, take a look at where you can decrease your hard costs, like packaging. Research alternatives to packaging while also looking into product costs and seeing if there is any way to bring those numbers down too. Also, look for ways to make your marketing money go further—can you send your product to influencers so they review it for free or can your leverage ad dollars for added value packages like custom content, event inclusion, or edit credits. Lastly, look at your scale. When you produce more units, you can make them for less and keep your price the same. And speaking of price, maybe take a fresh look at your strategy behind this as well—see if there is any way to raise your prices without driving away consumers.
Maximize ROI. Your Return on Investment is the ratio of a profit or loss made in a fiscal year. For example, if you invested $100 and you earned $110, the ROI is 10%. It’s important to evaluate all marketing spend, past and present, and determine the ROI, then weigh the tactics against each other to see which drive the most volume. When partnering with external agencies, consider all key performance indicators and the ROI of each strategy prior to investing. Sometimes investing in behind the scenes tactics, such as Search, can generate better returns than customer-facing tactics like TV and influencer.
Redefine networking. Now that the world has gone virtual, networking is much more than grabbing a coffee with someone, it is all about immediacy. Measure your marketing efforts to see which ones are the most cost effective and will deliver you the most reach in our fast-paced world. Give your business an instant presence through networks like Facebook, Twitter, YouTube, Instagram and LinkedIn. Offer demos or tutorials as webcasts, podcasts or across your social channels as digital downloads. A lot of these tools are free to start and by broadening your audience for low-to-no cost, you can start to really add to that profit column!
Rev up referrals. Testimonials are always a big win for your brand, but do you know what is even better? When your customer refers you to someone else. Chances are your clients already love your products, so why not encourage them to share their amazing opinions with others. Offering existing customers a discount or reward for bringing you new business is smart way to grow your revenue without adding big numbers to the expenses column. For more ways to start raising profits, lowering losses and moving your brand toward growth, check out the AVEENO® SKIN HEALTH STARTUP ACCELERATOR hub. You’ll learn tools directly from AVEENO® business leaders, industry experts, and more. Click here to explore the hub now.