I just got my annual financial statements from my bookkeeper. I am pretty happy with the results:
Revenue was up 8.5%
Gross Profit was up 12%
Net Profit was up 22%
What that means, in my business, I kept more of the money I made than went out the door to cover expenses. Business revenue is not consistent, and that's the key difference between working for someone and owning a business. In business, while we can drive revenue, it's really out of our control. Our customers are going to buy when they see value in our product or service, and when they are able to make the purchase. Costs, on the other hand, are completely within our control. Sure, there are unexpected costs, like the $900 car repair bill I had this month, and that's what having a Cash Reserve is for. But, generally speaking, our expenses are the same from month to month and within our control. Here's the process I used to cut costs, without sacrificing service excellence:
Review your P&L (some people call it the Income Statement) every month. I typically get my month-end financials from my bookkeeper around the 20th of each month. I set aside 30 minutes to go over the P&L to see where the money went that month.
Where possible, I eliminate monthly expenses by paying for services I use on a yearly basis. By prepaying my software subscriptions, for example, I typically save 10-20%. Insurance, typically an 8% savings. All of these savings add up.
I place a heavy focus on developing efficient business processes that provide service excellence. One way that I do that is by leveraging technology. I am able to automate many processes so that I can focus my time on developing relationships with my customers, and those that are not yet customers.
Lastly, by investing in my own personal growth and development, I have become more efficient with my time. By improving my skills, I am able to find solutions for my customers more quickly. As they say, time is money.
It's not any one thing that delivered the results this year. Rather, it was a combination of objectives and processes that gave me the framework to build on. Whether you are an entrepreneur or a professional who works for someone else, the principles of creating financial stability are the same. Make money, manage expenses, and build wealth.