This video includes part 2 of the 8 Secrets to Increasing profits fast. These two videos includes profit maximizing tips that any business in just about any industry to quickly increase their bottom line, sales & cash balances.
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This video includes part 2 of the 8 Secrets to Increasing profits fast. These two videos includes profit maximizing tips that any business in just about any industry to quickly increase their bottom line, sales & cash balances.
5) Create New Products. The fastest way to increase sales and profits is to sell more to your current customers. These are the folks who already know you, like you, and trust you. They should be the customers you know best.
One of the best ways to do this is to develop a new service or product to sell them. But deciding what to sell often stops the business owner right in their tracks.
The key to developing a new product is to discover a “pain point” your current customers have that is not being addressed by anyone right now. Start by asking your current customers, “What problems are you having that people in my industry are not helping you solve?” Follow up with, “If I had a solution for that, would you be interested?” Finally ask, “How much would you spend to eliminate this problem?”
I have been asking my business clients these questions for the last few years, and I have discovered small business owners consistently have the same answers. They want to pay less tax (who doesn’t?), they wish they had better information to manage with, they need to make more sales, and they wish they could expand and grow without killing themselves doing it.
Armed with this knowledge, I have slowly been developing and introducing products as
solutions to the problems my clients said they would be willing to pay to solve. Seems obvious, doesn’t it? Ask your customers what they would be willing to pay for, and then give it to them!
6) Increase Recurring Revenue. New business owners quickly miss the consistency of a regular paycheck. Every business has cash flow peaks and valleys. This creates stress when you are short of cash and can lead to excess spending when you are flush.
Recurring revenue that you can count on receiving every month is the key to eliminating the down times that are natural to your business and industry cycle. This predictable revenue stream greatly increases the value of your business.
Your goal should be to have enough steady income coming in every month to cover your normal overhead expenses. Every business can create recurring revenue by offering:
a. Hard contracts. Cell phones are a great example of this. Payment is locked in for a two-year period.
b. Auto-renewal subscriptions such as hard drive backups and cloud-based software. Subscription boxes (Birchbox, etc.) are also in this category.
c. Support agreements. Technical support contracts sold after a major product purchase are another good option.
d. Consumables. Buy a coffee machine for home use, and you will consistently need to purchase the pods.
e. Monthly payments for a required annual purchase. I use this for my large tax returns (see the bonus section for an example of the letter we send out).
f. Monthly retainers similar to what attorneys use. Our computer support company does this. They offer a package that includes priority service, regular backups, and up to four hours of support for a fixed price.
7) Cut Your Taxes in Half in 6 Easy Steps. Too many small business owners believe that hiring a good tax preparer is the secret to paying lower taxes. The typical small business owner believes that their work is done and they can move on to other things once they drop off their information at their tax preparer’s office.
They don’t do anything to control tax costs during the year, which leads to a nasty surprise when they get their tax return and end up paying a much higher tax liability than they expected.
Then they get mad and blame their tax preparer and promptly go hire a new one. Of course, this doesn’t change anything, since they took the source of the problem with them to the new tax preparer.
The truth successful business owners learn the hard way is that Uncle Sam is your partner! But he is a bad partner! He does little work in the business and demands a third or more of the profits.
Smart business owners also understand that income tax is an expense like any other. Thus, it can be planned for and managed.
1. Smart business owners take mid-year and year-end tax planning seriously. After the first of the year, there is very little that can be done to reduce taxes. Before the end of the year is the only time a business owner can effectively reduce their tax liability.
Many tax preparers do no tax planning at all. Be sure to look for a tax preparer that is very busy in December doing tax planning. Make sure though that they are only using legal methods of reducing income taxes. You are ultimately responsible for any future audit liability.
2. Smart business owners call their tax advisor before doing any major transactions. They call before selling assets, opening a business, or taking money out of retirement accounts. Since they know in advance the tax consequences of their actions, they don’t “shoot the messenger” when they get their tax return and discover how much they owe.
3. Smart business owners keep good accounting records. They don’t drop off shoeboxes full of receipts to their tax preparer. They understand that good accounting records ensure that they can deduct everything that is business related. With current technology, there is no good reason not to have good records in order to prepare your tax return.
4. Smart business owners get their records to their tax preparer early. Last year I prepared close to 50 returns in the last two weeks before the October extension deadline. There was no way that they could have received the same amount of help with reducing their taxes as I was able to give to clients earlier in the year. Smart business owners understand this, and make time to meet with their tax preparer as early as possible.
5. Smart business owners save for taxes as they earn the income. Uncle Sam’s motto is, “Pay me now or pay me more later.” Smart business owners make their estimate payments. The smartest business owners put an amount into a savings account weekly that represents how much they will owe. (Hint: Divide your total tax liability last year by your total sales from last year. Put this percentage amount in a savings account weekly.)
6. Smart business owners get a basic understanding of the income tax law. They don’t become experts, but they do learn how the system works and how they can use it to their advantage.
Many of my clients are very skeptical that these six steps can really cut their income taxes by such a large amount until I show them my Excel worksheets, all from real clients, that show significant savings:
• Consulting company: $244,675 (54.49%) tax reduction from the first estimate.
• Retail company: $108,627 (67.77%) tax reduction from the first estimate.
• Dental office: $ 25,578 (28.71%) tax reduction from the first estimate.
Imagine what you could do even with “only” saving $25,000! Do you really want to continue overpaying your taxes when you now know how to reduce them?
8) Using the 10 Percent Profit Formula to Thrive During Tough Economic Times. Business owners rightfully see their businesses being affected negatively by increases in federal and state taxes, tougher bank credit rules, increased audits by the IRS and state, customers who are more cautious with their money, and new ObamaCare taxes and rules.
What most business owners do when they get nervous is hunker down and play defense. They cut costs, cut employees, cut advertising, and do more of the work themselves. But those may not be the correct things to do when the economy is tough.
Now when times are good and profits are easy, many business owners become a little lackadaisical about improving business. When the economic landscape is tough, like it is now, that is no longer an option. In order to survive (and even thrive) in a tough economy, the business owner must become a profit coach for his business.
Most business owners do not understand that there is a formula and a process to improving profits. I express it as a formula as follows:
A 10 percent increase in qualified leads…
+ A 10 percent increase in the conversion of these leads into paying customers
+ A 10 percent increase in annual sales amount per customer
+ A 10 percent increase in referrals from current customers
+ A 10 percent increase in customer retention
= A 10 percent increase in sales
+ A 10 percent increase in gross margins
- A 10 percent decrease in product costs, overhead expenses, and income taxes
= A massive increase in profit!
A massive increase in profits resulting in increased cash flow and owner compensation is not an accident! It is the result of systematic improvement in each area of the profit formula.
But most business owners are so busy working in their businesses that they never seem to get around to working on improving them! The business owner must commit four hours a week to working on improving their business by following the profit formula.