The Only Business Formula to Grow A Business
Welcome to Barry’s Bite, a weekly article series from Barry Moltz, host of Business Insanity Radio. In this first article, Barry shares with us his thoughts on the only formula that grows a business.
Growing a business takes focusing on one simple formula: Profit = Revenue – Expense
Unfortunately, this is difficult because few small-business owners focus on their monthly financial statements. In any economy, a healthy company matches every expense with a revenue source to increase its profitability. Does every expense have a purpose?
Focus on these profit and loss statement categories:
- Cost of Goods Sold (or Cost of Sales): Is this the lowest price to produce the quantity needed at the quality customers will accept? Can the quality be reduced and still keep or grow the customer base? Some companies provide excess quality the customer does not want or won’t pay for. It all starts with identifying the numbers by using a simple accounting software such as Sage 50 and Quickbooks.
- Rent (and Associated Utilities): Does the company need a physical space or can it be virtual? There are many tools that are available that can enable communication between team members such as Sharepoint, Dropbox and Google Drive.
- Marketing and Sales: How does the company attract customers? Is this done using face to face, local search advertising, email or social media? Since every marketing expense is now “trackable” there is no excuse to find out what works and what is a waste of money.
- People: Who at the company brings in the revenue or supports it? Fire everyone else! What happens to the company’s productivity when a particular employee is on vacation?
- Phones and the Internet: When was the last time the company plan was checked since area is always priced competitively. Can a free service like Skype or OoVoo be used instead?
- Health Insurance: Obamacare officially gets started in 2014, but how will it affect your small business? Companies under 50 people may see a rebate, but larger companies may see an increase in cost.
- Office Supplies: Some companies tell employees to BYOS (Bring Your Own Supplies)! Remember, an office will consume as many office products as it is fed. Set a limit.
If other expenses were eliminated, what would really happen to the business? Business owners are surprised to see what they can do without.
Barry is a nationally recognized expert on small business who has given hundreds of presentations to audiences ranging in size from 20 to 20,000. As a member of the Entrepreneurship Hall of Fame, he has also taught entrepreneurship as an adjunct professor at the Illinois Institute of Technology. He has appeared on many TV and radio programs such as CNBC’s The Big Idea with Donny Deutsch, MSNBC’s Your Business and NPR’s The Tavis Smiley Show. He hosts his own radio show, Business Insanity Talk Radio, and writes regularly for the American Express Open Forum, and Forbes.com.