What makes a business profitable? What is necessary for business success
When starting a business, all entrepreneurs the same question in common. What makes a business profitable? No matter the nature of your company, its ultimate goal is to make you earn money and gain profitability. After all, we talk about having profits, but to achieve this, we have to achieve that coveted business success, a complicated aspiration, though not impossible.
To achieve a profitable business you have to have notions of business management, economics, leadership, communication … an immense range of qualities that will put us in the ranking of businesses that work. What are the basic notions and how do you succeed in business?
What do we call business success?
Let’s start at the beginning; what is business success. How can you know if you are getting this when you do not know what it means? It is not measured by the size of the clients or by the times you have been named on television. So, how do we recognise it?
- Financial success: the banking figures at the end of each month will give us a good indication of whether we are doing things well or need to improve. In this case it is important to define the financial objectives when starting this business. We must therefore analyse the big data that we have at our disposal, which will give us all the information before taking off. It is also important to have a good project feasibility plan that can be presented to investors and shareholders.
- Building a business from scratch: Developing a business from scratch is very gratifying. We can see how our idea is realised, helping or offering a service to our clients who really demand our product.
- Fit it in your lifestyle: creating your own business must entail certain freedoms, it’s the good thing about being your own boss! If your company does not allow you to live the way you want (within reason), you are not getting the personal success that it should bring you. Define it: do you want to spend more time at home? Travel? See the family? Decide your own fate? Find out what you are looking for and whether your company meets those needs.
- Mark a distinction: many entrepreneurs embark on the adventure of creating their own business in the firm belief that their innovative and creative ideas will be an improvement. There are thousands of examples of this, from Netflix to Facebook, going through the famous Napster in its day. Have you improved anything?
- Create jobs: a good way to know whether things are going well for your company is the number of employees you have. The bigger the business, the more personnel you will need to manage it and that only means one thing: success.
What does business success depend on?
Once it has become clear what it means to achieve a profitable business based on your aspirations, the time has come to study the keys to how to truly succeed in business. No matter the size of the company, from small companies to SMEs or even multinationals. They all have something in common: these factors of business success.
- Passion: it sounds topical, but if you do not enjoy the trip and have fun doing what you like, it is unlikely that the money will arrive and the company will fail. Steve Jobs is the perfect example, he always enjoyed creating innovations that consumers did not know they wanted until they had them before them.
- Work: nobody ever said that things would come easily. Starting your own business and making it successful requires working hard every day. For this reason, in order for your company to succeed, you must work hard, persevere and dare to make difficult decisions.
- Excellence: do not dare to compete with other companies because you cannot think of anything better to do. Do something in which you think you can be the best in the market. Learn, look, observe, listen and, above all, practise.
- Go beyond: the doubts and barriers that we place on ourselves are often the main causes of a company’s collapse. Exceed all expectations, leave your comfort zone and you will achieve something amazing.
- Concentration: forget about multitasking and learn to delegate. Focus on just one thing at a time and do not step away from it until it is perfect.
- New ideas: do not close yourself in on what you believe or on new innovations. Surround yourself with a good team, listen to their ideas and have the humility to recognise that they could be even better than yours.
- Insistence: opening a business from scratch is not a path of roses. There will be potholes, failures and blunders. Persevere and do not waiver, if you surrender you will never know whether yours was a success story. Ignore criticism, rejection, pressure and people who try to sink you.
How to achieve and measure a business’s profitability?
Now that you know the keys to business success and the formulas for achieving a profitable business, the time has come to talk about profitability. How do we become profitable?
- Control your expenses to the millimetre: every euro you save will be a profit. That is why it is important to observe what the money is going for, to see how these losses can be avoided or improved, and to analyse cheaper and more appropriate alternatives to know how to achieve business success; but without crossing the line: efficiency first.
- Increase profit margins: this is the difference between the price of your product and what the customer pays for it. That is, the profits you get when you subtract the production cost. Raise prices in a way that balances those of the competition and try to reduce manufacturing costs.
- Manage the inventory: prepare monthly and annual budgets and follow them strictly. Exploit your inventory as much as you can.
- Take care of your clients: one of the first lessons learned in business school is that a new client is always more expensive than an existing one. You have to invest in capturing them, look after them, look for them, etc. On the other hand, a satisfied and recurring consumer is the best investment, since he will repeat his purchases whenever he receives adequate treatment. You can also reference other potential consumers.
- Become strong with technology: it is your ally. You can reduce the errors, the production chain and the working hours of your employees. It helps analyse millions of data and saves time, optimising the operation of the company. Do not watch over it, it will manage to achieve business success before you know.
When measuring said profitability, there is nothing like calculating your expenses and your profits. Subtract them and if the result is positive, voilà! You are doing something right.