This is an Article puplished on News.com.au and is a great Article for Small Business Owners! We reccommend frequent and continued research helps to promote strength and success in Small Businesses!
ONE of the biggest lessons every small business owner needs to understand is the difference between profit and revenue.
Revenue is all the money a business earns before expenses such as taxes, wages and rent are taken into consideration.
Profit, on the other hand, is the money the business earns after all its expenses have been paid.
While it's important to have a handle on the revenue the business earns to make sure incomings cover outgoings, it's the profit figure that really matters.
The best business owners are focused on consistently trying to improve their profit margins.
How do they do this?
There are two main steps.
The first step is to try to reduce business costs. Cost reduction means constantly looking at ways to reduce every day expenses such as wages, utilities and phone bills.
The second step is to increase the amount the business charges for its products and services. Increasing prices is something that can be harder to achieve than cost reduction - especially if you operate in a commoditised market.
Although you won't be able to raise your prices as frequently as you can monitor your expenses, it's a good idea to regularly review your pricing structure to see if there are opportunities to make some changes to help increase your profits.
The worst thing you can do from a profit perspective is maintain your prices at the same level for years on end, while at the same time absorb rising costs. Why not look at the relationship between your costs and your prices to see if you can make some changes to increase your profit margin this year?
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