We need to learn from Albert Einstein when it comes to doing business
Albert Einstein’s quote: “The definition of insanity is doing the same thing over and over again, but expecting different results” is well known. It’s what led him to his various discoveries.
Einstein kept trying different things and it really is no different in business when it comes to making money.
If you want more profit, you need to make some changes and you need to be prepared to do things differently. From my experience the most successful of entrepreneurs are the ones who have an amazing resilience that is evident in their ability to keep going when others would tend to give up and to keep trying new things.
Based on this approach, here are 5 simple things you can do in your small business today to create the best chance of making more profit this year.
1. Review your systems and procedures
Are there different ways you can achieve the same result but using less resources? I used to run an accountancy practice and at one stage we had over a dozen different databases that were used for different aspects of the business. We had lists for this and lists for that. By identifying why we had the different databases and lists and what they were used for, we were able to eliminate many of them and reduce the number to 4. In doing so, we also saved many hours of time of admin staff updating the multiple databases every time there was a change.
2. Consider automating wherever possible
The majority of business can obtain the benefit of automating their accounting system by switching from desktop software or spreadsheets to online systems. An electrician who used spreadsheets that took 4 days at the end of the quarter to update reduced that time to 4 hours per quarter when they converted to an online accounting system. Time savings for businesses converting from desktop software to online accounting systems average 50% of the data entry and reconciliation time.
3. Look at the pricing of everything you’re paying for and check whether you can get better pricing
Take a moment to review your telephone/mobile phone accounts and check whether you can get a better deal. Review your business insurance policy in detail. A client in the medical industry found savings of 75% in their business insurance. This arose from a combination of changes in the business, a reduction in the amounts needed to be insured and elimination of some areas of insurance that were no longer necessary. The premiums fell from $ 80,000 per annum to $ 20,000. The saving of $ 60,000 meant an instant increase in profit of $ 60,000.
4. Are your advertising and marketing costs bringing in revenue?
To answer this question you have to be recording where your new business is coming from. If you aren’t tracking this, then that’s the first step. If you are tracking it, take the next step and identify what return you are getting on the advertising and marketing costs. One current client knows that if they spend $ 1000 on Facebook ads, they will make an extra $ 10,000 of revenue with a gross margin of 38%, that means for every $ 1,000 they spend on the ads, they will make $ 3,800 in gross profit.
Another client who was in the motor vehicle servicing industry some years ago was spending $ 10,000 for Yellow Pages ads around the time when Google was starting to become our source of information. They had no leads at all from the previous year from the Yellow Pages ad and were being encouraged to re-sign. Needless to say, they didn’t and instead spent $ 5,000 on a different promotional campaign increased their profit with the other $ 5,000 that they didn’t’ spend.
5. Find out if you have the opportunity to increase your selling prices in some way
This could be by finding a way to add extra value to each sale. Or it could be by identifying a m market niche and in doing so differentiate your business from your competitors. It may be as simple as providing a guarantee. Guarantees work well particularly if there is any area where your industry is well known at being bad at.
For example, the tradesmen who have a bad name for always turning up late. Could you create a guarantee that eliminates this? Or could you guarantee to return phone calls within a specified time frame? There are a myriad of options here that are only limited by your imagination. Find a way to make your business different and you will attract more of the type of clients or customers that you want and in doing so, increase sales and profit.
There are many different ways to make more profit. Take one idea and work on it for one month. Then the next month work on another idea. You’ll find as the months progress that you are making more profit and you may also find that your team are more engaged in the business too. Remember, if Albert Einstein’s approach worked so well for him, it can work for you in your business.
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About the contributor:
Amanda Fisher fuses accounting and technology to help improve business. Amanda’s mission in life is to educate business owners on how to understand and interpret their business numbers to make informed decisions. She shares that knowledge in a fun and inspiring manner. Amanda’s easy to understand style has enabled her clients to come to grips with the numbers and use them to improve cashflow, profits and their take home. Website: http://amandafisher.com.au