Profitability starts with knowing your numbers. I know, it sounds pretty simple, but I think you may be surprised when you realize what you’re leaving out. If you ever feel like your business is leaking money (and that’s a complaint I hear often!), then start by tracking every single cent that’s coming into and going out of your business.

From there it’s all about knowing the metrics for profitability. For example, how much of the money coming in do profitable businesses spend? And how much do they save? How much do they spend on their payroll and other specific operating expenses?

There are five metrics to track:

• Revenue
• Operational expenses
• Taxes
• Owner’s pay and
• PROFIT!

But first you have to track that money.

Solution: Track all the money. Make sure you have the right accounting solution, the right Chart of Accounts and the right bookkeeping team to help you get the numbers in there and give them to you regularly.

This may seem obvious, but in many cases, business owners feel so overwhelmed by the idea of “financials” and reports and numbers that they simply shut down when it comes time to look at their reports. If this is you, don’t worry—you can change your habit of turning off, so you can end the overwhelm and take control.

The basic idea is this: Make sure your inflows (in other words, revenue, money coming in, the green stuff) are more than your outflows (money going out, expenses, etc.).

If you’re spending more than you’re making, that’s should be a big red flag—a giant one—that signals something is not working!!

Solution: Buckle down and take a look at those reports! (If you want to make it fun—or, more fun than you think it’s going to be—grab yourself a special treat, like a cup of coffee or a few pieces of chocolate and settle in.) It’s time to ask yourself: Where can I decrease certain expenses or increase certain income so I strike a profitable balance? (If you don’t know which ones to look at, get in touch, we can help you with that!)

You’re in business because you want to make an impact, right? But, let’s be real: you also want to see the green.

Chances are, if you haven’t seen the profits you want to see—or, as the business owner, you’re not getting paid, regularly—you’ll definitely want to put in place new metrics and goals (or in some cases, any metrics and goals). These metrics and goals must be something that everyone in your business understands and can get behind. These metrics and goals need to be absolutely clear in order to guide you and the members of your team. For example, consider how you’ll balance impact (how many people you reach) versus wealth (how much cash you have).

Shifting from one set of metrics to another, and becoming profitable with the new set, can take time—as long as 18 months or more—because it requires you to develop a deeper understanding of your income, outflows, and debt. And it can be tricky, so you’ll need someone skilled to make sure you really nail it … which leads me to my next point.

Solution: Make sure that you have clear metrics, goals, and vision—and that everyone knows his or her part in how to get there. As a business owner, you can’t do it alone. And I believe that as visionaries, we are not designed to do it alone. We need our team. But our team members are only as effective as the guidance and leadership we give them.

Many, many business owners have a tough time changing their metrics. Almost no one can do it alone. We are social creatures, after all.

Business owners are often frozen because they doubt themselves, they feel uncertain about what to do next, or they aren’t clear on what changes to make.  Maybe you’re struggling with subconscious (or conscious) beliefs that wealthy people are evil (and you don’t want to be evil) or that making money isn’t spiritual.  Or, that if you make lots of money, you might outshine your sweetheart, or your family. Maybe you grew up in an environment that said that you’re not supposed to talk about money. So you’re afraid to reach out.

Those are symptoms of stuck mindset. The good news is, you are NOT alone. I’ve heard from so many entrepreneurs who experience this!

 The better news is that you can overcome this mindset and get unstuck.

 If you feel stuck (or even if you don’t feel stuck but some of the ideas above sound familiar), you must dig in and untangle what’s going on and take a good long look at what’s behind your challenges as you begin to implement new metrics. This is a critical key step in making financial progress. And remember: you CAN do this! 

Solution: If you’re struggling with increasing profitability, work on your mindset and your planning and implementation, simultaneously. You can do mindset work by taking classes, joining a community, or working one on one with a professional.

If you’ve ever hit a certain month or time of year and panicked because your income is a fraction of what it was the previous month, then you know how unsettling those “surprises” can feel! You’re here because you’re seeking that security we talked about earlier, right? And who doesn’t want that?!

One quick and relatively easy to increase your feelings of security and stability in your business is to pay careful attention to how your financials change, month to month and year to year. It’s entirely possible that you have seasons—certain time periods each year when you make more or less money (for example, accountants and bookkeepers are busier during tax season, January through April).

Many of my clients are consistently surprised by this—and it’s not the good kind of surprise, right? But the good news is that if you can anticipate your seasons, you can make the most of them.

Solution: If you see a pattern emerge, and if you discover that you do have seasons, identify them. When do they go up and when do they come down? Then, consider what you can do to love up your income during your down time, or prepare to make the most of your up, or busier, time by doing things like saving more for when the tide comes in.

While you’ll have some fixed expenses, like rent or car insurance, you’ll also have lots of variable expenses. These are the sneaky little expenses like postage and printer ink or that annual expense you forgot about that automagically goes through on your credit card. Most people forget to think about those. Until they get hit with them.

Sound familiar? If so, then you may believe you know what it costs for you to run your business—but you may be shocked when you look at your bottom line and see that you spent way more than you realized.

(Not sure if this applies to you? Have you ever looked at your bank balance and thought, “Wow, that went down fast”? If so, then you may have succumbed to some of those forgettable expenses! Not to worry—they’re trackable!)

Solution: Make a plan. Make sure you know what’s happening with your expenses, when. Take a look at that tracking and see what’s really going on. Leave nothing out! Be kindly ruthless about getting every detail of every transaction so that you have the data you need to rock your financial clarity.

In the majority of cases, financial struggles are the result of a lack of information. So yes, you are smart and brilliant and talented, despite your overwhelm when it comes to finances. All you need is a bit more info.

As a business owner, it’s your responsibility to educate yourself, to get the information you need to make decisions that lead to the results you’re striving toward. Most people don’t get all the information they need, whether it’s because they ask and their bookkeeper says they don’t need to see it, or because they don’t know what to ask for.

Look at your balance sheets, get the reports you need, and get the information you need to make better financial decisions.

Solution: Keep asking until you get what you want, and when you’re talking with your bookkeeper or accountant or financial professional, have the conversation you need to have about what’s going on for you, so your bookkeeper can really help you!