You've made it through your first year in business. Congratulations! But as the excitement and flurry of first-year success begins to fade, businesses often realize that while they've survived, they may not have thrived.
If this sounds familiar, it's time to get serious about turning a profit in year two. Learn from other small business owners on how they turned first-year survival into a more lucrative second year in business. Here are three tips to get your balance sheet on track, so you can be sure your business makes it into year three — and beyond.
1. Keep your eye on the prize
Remember that being busy isn't the same as being productive. Don't just do a lot of things. Instead, get things done that help improve your company — you can't say yes to every event or marketing opportunity. Make sure that, however you spend your time and resources, it fits into your business plan and where you want to go in the future. For Shampooches Dog Grooming, a business in Alton, Illinois, featured on Season 3 of Deluxe's Small Business Revolution series, the key to financial growth was to establish a game plan to focus the business's operations.
Shampooches owner Alicia Jeffreys says, "I was getting overwhelmed with what I had to do for payroll." With one full-time employee and looking to hire another, she didn't know where to start with a payroll program. She found that a solution like Deluxe Payroll Services allowed her to save time and energy, while ensuring that payroll was properly executed every time.
Well-oiled operations like outsourced payroll keep things running smoothly, but make time for marketing as well. Jeffreys looked to Deluxe to help her provide branded promotional products that would serve clients' needs for things like dog toys and collars — while doing double duty as Shampooches advertisements. By selling these items, Jeffreys could grow her revenue while promoting her brand via her customers.
The combination of operations and marketing improvements have made an impact on Jeffreys, who says, "This feels like a real business!"
2. Do more than survive
Even if you expect profitability to be high, keep expenses as low as possible — so don't hire a position unless absolutely necessary or spend money on fancy programs when you could find a cheaper solution online. Often, the better option is to outsource work or look for someone new in the field trying to get their name out (these contacts typically have lower rates than their more experienced colleagues). Don't buy things simply because an article said your office needs a certain thing to make you productive. Instead, create a budget and only purchase what you need now to keep the business running.
Be realistic about finances. In your first year, you may be working for free. Make sure you have money set aside in case of a slow month or several. In fact, it's a good idea to have enough money saved to live off of for a year. And if things go well, you'll still want to be disciplined: Take the money you could pocket and invest it back into your business. Use it to improve your products and marketing, or outsource something that's slowing you down. Don't be afraid to outsource important tasks like marketing; it's not always as expensive as you think.
Survive while finding ways to thrive. It's a delicate dance, but while you handle the everyday operations, look for ways to grow your business. In Season 4 of Small Business Revolution, watch see how a woodworker went from losing precious time to time well spent. He just had to make slight changes to his process and accept help to grow his business.
Be patient. Perseverance is key, and tools like automated email marketing can free up time during your day. You can't do it all, and that's okay. In year two, devise a game plan, create a budget and think about your marketing plan — consider including an expert to quickly and effectively implement parts of your plan.
3. Focus on profit
At some point, passion can only go so far. You need to go from dreaming of survival to maximizing your time and turning a profit. Dig into your numbers so you can get to the heart of your expenses, what you're making and how it stacks up to expectations.
If you're not bringing in as much as you hoped, consider what nooma Yoga Studio from Season 4 of Small Business Revolution did to increase funds and support business growth. They dreamed of franchising, but needed to improve the financial health of their current locations first. Owners Casey Cox and Nicole Hopkins broke even each month, but hadn't paid themselves a salary yet. They weren't sure how long they should wait for things to improve.
The answer came in deciding how much they were willing to invest in order to get a return. They set goals and deadlines: These should be realistic but daunting. The owners' goal was to bring in more revenue by upping the class prices by a few dollars and expanding the space to fit more people in a class.
Consequently, nooma is enjoying an increase in profits and is months ahead of schedule.
How does your business stack up?
You survived year one with blood, sweat and tears. Make year two the year your passion turns a profit by following these 3 steps to success: Stay focused, do more than survive and focus on profit. With a bit of effort, your business will be heading into year two stronger than ever.
Is your business ready to go from being your passion to turning a profit? Take this free quiz to see where you stack up for year-two success.
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