Things are good at the office. Projects are moving forward, client payments are current, the calendar is full for the next few months – no potential disasters on the horizon. At times like these, small business owners may become complacent – satisfied with the status quo.

So you put off invoicing customers promptly, you let “slow pays” affect your cash flow, and you focus on avoiding anything that might rock the boat. Problem is, the boat is already rocking.

Variable business expenses rise and fall as your company conducts less or more business. But you’re responsible for fixed expenses whether you sell 10,000 gizmos or 10 gizmos – rent, utilities, salaries, insurance, and other fixed expenses need to get paid every month.

So, every day resolve to focus the business on proactive ways to increase profitability.

What’s Your Break-Even?

You know your fixed expenses to the penny. You know the cost of goods produced and sold. You know your margins. From these numbers it’s easy to calculate your monthly break-even point – the point at which you start making money.

Add up your fixed and variable expenses. Divide by proceeds of sales and you get your break-even – the number of gizmos you have to sell, or the number of new client engagements you have to complete, to earn a net profit – what’s left over after fixed and variable expenses. Calculate break-even, and recognize that break-even changes as business conditions change.

Get Profitable Faster

Sure, things are going well, but if your crew settles into routines, and is happy with the way things are, it may be time to shake things up by resolving to turn a profit each day, each week, month, and year.

The key to profitability is generating as many sales of your products or services required to pay the company’s fixed and variable expenses. The faster you generate company revenues through sales each month, the faster your business becomes profitable.

Let’s say you sell sporting goods in a brick-and-mortar retail outlet and online. You know your fixed expenses, the cost per sale, and the margins on every product in inventory.  You’ve calculated that every 30 days, you break even on the 25th day of the month.

So, each month, you have five or six days in which you’ve covered your break-even, and the company turns a profit after you reach break-even on day 25 of each month.

Simply by creating a sense of urgency within your business to focus on profits – to get those invoices out ASAP, to provide client incentives for early payment, to boost cash flow – all of these steps, and many more, can help increase your business’ profitability.

Focus on the Small Picture

To track the growth of company profitability, set short-term goals. A certain dollar amount of sales per day, for example. This way you can track progress toward increased profitability at the microscopic level.

On day one, you don’t reach your daily projections. That simply means that on day two, your team has to work a little harder, and focus a little more on creating net income – company profit.

Depending on your business, create milestones and track those milestones to maintain resolve on the part of your business team.

Focusing on daily steps toward faster profitability each month also enables you to adjust business strategies quickly as markets and inventories change. This approach identifies potential downstream logjams before they become back orders.

Keep the Staff in the Loop

Keep your staff informed of progress toward monthly profitability, and make sure that each employee recognizes that business profits translate into higher salaries. There’s professional and personal benefit in creating profits faster each month.

Explain changes in procedures to all stakeholders to make sure everyone’s on the same page. Explain why changes are implemented. Define expectations.

Define success. Break even faster each month, and help grow your business from “getting by” to getting big.


The information provided is presented for general informational purposes only and does not constitute tax, legal or business advice.