How to Increase Small Business Net Profit

Profit, not revenue, is the key to success. Here's a 5-step Margin Analysis framework to track profit vs revenue As a financial consultant, I've worked with businesses struggling with profitability due to a lack of in-depth margin analysis. Managing your margins can be a game-changer for your bottom line. I work with clients on shifting their mindset that margin analysis isn’t just a one-time strategy; it’s a continuous process. To help clients stay on top of their game, I put together a checklist of daily, monthly, and quarterly habits to be sure you’re always optimizing your margins. Daily Habits: 1) Review Sales and Cost Data: Do a quick check if daily sales are in line with your projections and monitor unusual changes in costs. 2) Track Key Performance Indicators (KPIs): Focus on daily KPIs such as gross margin percentage and average order value to identify issues. Monthly Habits: 1) Analyze Margin Trends: Compare your current month’s margins against previous months to spot trends or anomalies. 2) Update Financial Projections: Adjust forecasts based on actual performance and any market changes. 3) Review Profitability by Product/Service: Identify which products or services are underperforming and consider adjustments to pricing or cost structures. Quarterly Habits: 1) Conduct a Comprehensive Margin Analysis: Deep dive into your financial statements to assess the health of your margins. Look at (COGS), operating expenses, and net profit margins. 2) Reevaluate Pricing Strategies: Based on your margin analysis, adjust your pricing strategy to ensure optimal profitability. 3) Optimize Cost Structures: Review your cost management practices and look for opportunities for cost reductions or process improvements. Hope this simplifies the process, and helps to start building these habits. Also, I've attached a brief guide on How To Strategically Improve Profit Margins If you need help developing and executing a financial strategy DM me ___________________ Please share your thoughts in the comments Follow me, Beverly Davis for more finance insights

This small shift in our finances helped us scale past $50K/month. We stopped focusing on revenue. And started tracking the right numbers: 1. Gross profit. Because revenue is a vanity metric if your costs are eating all your margins. We focused on delivering our services in the most efficient way possible. 2. Net profit. More revenue without margins is working harder for the same outcome. We got obsessive about efficiency: Cutting unnecessary software costs Negotiating better deals And streamlining operations To increase what we actually add to the bank every month. 3. Churn rate. It’s easy to celebrate new sales. But if customers are leaving just as fast, you're running on a treadmill. We optimized retention before acquisition. 4. LTV. Scaling without understanding customer lifetime value is a dangerous game. Once we figured out exactly how much a client was worth over time, we knew how much we could afford to acquire them. 5. LTV to Acquisition Cost Ratio. The simplest way to tell if your business is scalable. If you're paying more to acquire customers than they’re worth over time, you're in trouble. We optimized this ratio to make sure every dollar spent on growth actually paid off. You usually want to have a ratio of 3:1 of LTV/CAC. These five numbers moved us from "How much did we make this month?" to "How much will this business be worth in three years?" Most founders don’t track these. Don’t make that mistake. Track the right numbers. Make better decisions. Your growth depends on it. What’s the one metric you obsess over in your business? 👇 PS: Fuelfinance has been the best partner to help with our finances.

The biggest reason small businesses fail to grow their profits? Their founders think adding more clients is the only way to scale. Chasing new clients feels like progress. But it often leads to burnout, not profits. Here’s the truth- Growing profits isn’t about how many clients you have. It’s about the value you get from the ones you already have. Here’s how you can smartly price your products and grow your profits (without adding extra work) 1. Understand your costs and profit margins. Your pricing should cover expenses, reflect your expertise and leave room for profits. -- 2. If your product solves a real problem, price it like it does. Clients who value quality won’t mind paying for the results you deliver. -- 3. Create pricing tiers like basic, standard and premium. This lets you serve different client needs while capturing more value from premium buyers. -- 4. Pricing isn’t fixed  Experiment with adjustments and monitor client responses. -- I’ve seen founders hesitate to raise prices, worried they’d scare off clients. But here’s the reality Clients who value your expertise are happy to pay what it is worth. PS: When was the last time you reviewed your pricing strategy?