We all want to get to profitability the minute we open our businesses. However, that does not go as planned and after sometime, if you are lucky, you start getting cash positive. Most start-ups don’t get to profitability till the second year of operation.
If you read our article on reducing your costs in running a business, you will find tips to fast track your journey to profitability.
Growth can be slow. 10% – 15%, however, there are things you can do to ensure that you increase your revenues, though this is entirely dependent on your prices, volumes and your business revenue model.
If you can answer the questions below, you will find the answers that can drive you to increase in revenue in no time.
What does the revenue structure look like?
Do you sell a product or a services? How do you earn money from whatever you sell? To answer this, you have to look at these two questions.
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What are the prices
Why did you price that way? What is the cost of production/ manpower? Whar are the margins to get to profitability? What are your competitors charging? What other value do you offer with that pricing?
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What are the volumes
If it’s a product, how many units do you produce everyday? If it’s a service, how many clients do you need to see everyday to get the the revenue that you desire? How many clients are you reaching daily? Weekly?
To fully get the answers, you have to look at the cost of goods that eat up into your profit margin. What we want is to reduce the costs as much as possible.
What does the cost structure look like?
In this, you have to look at every expense you incur in order for you to produce your products or provide the services to your clients.
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What are the fixed costs
These are costs like rent, warehousing etc, These costs rarely change unless you move to a cheaper place of operation.
2. What are the variable costs?
These are costs that change with time. Here is where as an entrepreneur, you need to learn how to save costs. Get discounts on materials, plan your week so deliveries are done on the same day and cut down on transport costs etc. pay in advance to allow you get some discounts, buy goods in bulk as this reduces the costs.
When you answer these questions, you will realize that there are some avenues that you can save a lot of money, thus reducing your costs ad increasing your productivity.
Good luck!
