Most business managers will tell you success depends on how much business you are doing. Accountants call it “top line revenue.” It’s a measure of how many widgets you’re moving month to month and week to week. While top-line revenue is vitally important, it’s by no means the only way to measure success. Keeping your business in the black is a little more challenging.
Not Just What You Make
The employees of the company trying to increase its top-line revenue will tell you it’s not just what you make, it’s what you keep. This is of paramount importance to the business as well. No matter how many widgets you sell, if a significant enough portion of those sales are draining away into unrecoverable costs, you’re headed for Chapter 11 whether you like it or not. The first and most obvious step is to minimize your cost of production. The rest is how much you keep.
For brokers and real estate salespeople, shaving a little off as the big block of money goes by is how they make their living. For business owners, too many shaved-off pieces for everyone else means nothing for you. The first and most important cost to watch for are those little innocuous percentages: Two percent transaction fee, three percent transfer fee, five percent shipping fee, and so forth. You start with 100 percent. Make sure you aren’t giving away 101 percent before you get the product out the door.
This little surprise can put you out of business overnight. In today’s economy, customers, clients and even vendors have a full range of options when it comes to getting their money back fairly or unfairly. A number of experts refer to the practice as “friendly fraud.” Customers will take delivery of valuable work, and then charge it all back on their credit card, or file a dispute with the payment processor. Make sure you accept payment by means that don’t give your customer push-button access to getting their money back.
In some cases customers or clients refuse to pay after receiving your services or product. Depending on the size of the order this can be ruinous, as your business is not only out the money, but also out the costs of building and shipping the order. Whenever possible, secure payment in advance. This can’t be emphasized enough. The last thing you want to spend your valuable time doing is chasing former customers for money. Using a service like this credit card processing for collection agencies can really help with this problem.
You can’t fix it if you don’t know it’s broken. If your goal is to minimize costs and maximize the amount of revenue and profit your business earns, then you have to watch your money penny by penny. There are dozens of ways to track money these days between mobile apps, PC accounting programs, the army of accountants within ten miles of your office, and so on. Get one or more of them, take the time to get them set up, and track every cent.
This process can seem daunting at the beginning, but like everything else in business, making and keeping money is a mechanical process. Once you build the machine, all you have to do to make it work is keep turning the little wheel.